How to Calculate a Wholesale Deal, Step by Step

Introduction

Wholesale math is not complicated, but it is unforgiving. The formula takes about a minute. The inputs are where deals die.

Here is the full method, then the part that actually determines whether you get paid.

The Logic: Work Backward From the Buyer

You are not calculating what a property is worth. You are calculating the highest price you can pay while three other people still get what they need.

Your end buyer needs their profit margin. The property needs its repairs paid for. You need your assignment fee. Whatever is left is what the seller can be offered.

That is why this is a reverse-engineering exercise rather than a valuation exercise.

Step 1: Target Buyer Net

Start with After Repair Value and remove the buyer's required profit.

Target Buyer Net = ARV × (1 − Buyer Profit %)

This is the maximum total acquisition cost your end buyer can absorb - including repairs and your fee - while still hitting their profit target.

Most fix-and-flip buyers require 15% to 25% of ARV as gross profit. Set it to 30% and this step produces the classic 70% rule - ARV × 70% - with repairs and your fee then coming off that figure.

Step 2: Maximum Allowable Offer

Now subtract your two costs from that ceiling.

MAO = Target Buyer Net − Estimated Repairs − Wholesale Fee

Or written in full:

MAO = [ARV × (1 − Buyer Profit %)] − Repairs − Wholesale Fee

That is your offer price. Every dollar above it comes out of somebody's margin, and eventually out of your ability to assign the contract.

A Worked Example

Take a property with an ARV of $300,000, a buyer requiring 20% gross profit, $45,000 in repairs, and a $10,000 assignment fee.

Target Buyer Net = $300,000 × (1 − 0.20) = $240,000

MAO = $240,000 − $45,000 − $10,000 = $185,000

Now check it.

MAO as % of ARV = $185,000 ÷ $300,000 = 61.7%

Total Equity Spread = $300,000 − $185,000 = $115,000

Buyer's Gross Profit = $300,000 × 0.20 = $60,000

Reading the Result

The percentage is the benchmark that tells you whether this is real.

At or above 65% of ARV - generally viable in most markets.

Between 50% and 65% - marginal. It can work, but repair estimation has to be accurate because there is little room for error.

Below 50% - typically will not attract a qualified end buyer, whatever the spreadsheet says.

Our example lands at 61.7%. That is marginal territory. It is not dead, but the $45,000 repair number needs to be right, and if it comes in at $60,000 the deal fails at assignment.

When to Deviate From 70%

The 70% rule is a default, not a law, and experienced wholesalers adjust it.

High-value markets, ARV above $400k. Buyers often accept a 75-80% rule because the absolute dollar profit remains significant on a tighter percentage. A 15% margin on $600,000 is $90,000 - plenty of reason to do the deal.

Distressed or rural markets. These usually require a deeper discount, 65% or below, to compensate for longer hold times and higher execution risk.

Light-rehab deals. Cosmetic-only properties support a higher MAO, because the buyer's risk and carrying costs are lower.

Adjusting the buyer profit percentage to reflect your actual buyers is more accurate than applying one rule everywhere.

The Input That Kills Deals

The formula is arithmetic. The inputs are judgment, and two of them decide outcomes.

ARV errors cascade. A 10% mistake on ARV moves every downstream number. In the example above, an ARV of $270,000 instead of $300,000 drops MAO to $161,000 - a $24,000 swing on a single input. Pull real comps. Do not use an automated estimate as your final number.

Underestimating repairs is the single most common reason a wholesale deal collapses after assignment. You put it under contract at a number that works on paper, the buyer walks the property, their contractor prices it $20,000 higher, and the assignment falls apart.

Your fee absorbs errors until it does not. Padding repairs slightly is cheaper than losing the contract.

On the Assignment Fee

Typical assignment fees run $5,000 to $20,000, with most wholesalers targeting a $5,000 to $10,000 minimum. High-value markets regularly support $25,000 or more.

Worth understanding structurally: a higher fee requires a lower purchase price. Your fee is a direct deduction from MAO. Every extra dollar you want makes the seller's offer a dollar worse, which makes the contract harder to get signed.

That is the real constraint on fee size - not what you deserve, but what the spread supports while the offer stays acceptable to the seller.

Run It Before the Appointment

The calculation takes a minute. Do it before you sit down with a seller, not after.

Walking into an appointment knowing your MAO means you negotiate against a number rather than a feeling, and you know immediately whether a counter is workable or a deal you should walk from.

You can run the full calculation, including equity spread and viability thresholds, on the Pathwaize wholesale calculator.

And once the number works, the constraint shifts from math to speed. The spread only matters if you are the buyer who was still in the conversation when the seller decided - which is a follow-up problem, not a calculation problem.

Educational and informational only. Not investment, tax, or legal advice. Figures are illustrative. Verify every input against your own market and consult a qualified professional before making an offer.