As a beginning wholesaler, figuring out how much to offer on a property is one of the most confusing aspects of the wholesaling process. When I was first getting started it would take me hours (sometimes days) of crunching numbers, running comps, and plugging figures into various formulas before I actually came to a decision about how much I should offer, and even then, I still didn’t feel very confident with my numbers.
It’s been three years now since I completed my first wholesale deal, and my method for determining offer amounts has changed quite a bit. These days I don’t use any sort of formula, I rarely run comps, and I can’t remember the last time I had to crunch numbers to arrive at my offer amount. The strategy I use is pretty simple, and can be broken down into the following three steps:
Choose a farm area and determine who the active investors are in this particular part of town. There are multiple ways of finding out who the active wholesale buyers are in any given neighborhood, some of which I have written about in this article, and also this one.
Once I have located some active cash buyers in my farm area, I ask them if they are looking for more deals in the neighborhood, and if so, I find out EXACTLY what they are looking for, including price range, preferred type of construction, minimum square footage, etc. I try to get as much information from them as possible so I have a very clear picture of what type of properties they are looking for and the prices they are willing to pay for them.
If I have the buyer’s first and last name I will do a search on the property appraiser’s website to check out what other properties they own and how much they paid for them. This gives me an even better idea of what they are looking for in a deal.
Once I have located a few of the active buyers in my farm area and done some research to find out what a deal looks like in their eyes, I then head to the MLS and start making offers on properties that fit their criteria, making sure to leave enough room in the deal for both myself and my end buyer.
Rinse and Repeat.
I’ve been using this strategy for the last few years quite successfully. To me it is much simpler to just go directly to the end buyers and find out exactly what they are looking for. Approaching it from this angle removes much of the uncertainty and guesswork from the offer making process, and makes my job as a wholesaler much easier.