One of the most important keys to becoming a successful real estate wholesaler is knowing your market inside and out, and being able to tell if a “deal” is really a deal. This is a skill that takes time to develop, but once learned, will make your life much easier when deciding whether or not to pull the trigger on a deal or to just let it go.
You don’t need to wait until you’re an expert in your market to start taking action and making offers, however, and until you get to that point you can use the following technique to help analyze your potential wholesale deals.
Look at the Recent Investor Comps (Comparable Sales)
While some wholesalers prefer to look at the retail (highest) comps in the neighborhood to determine their offer amount, I prefer to focus on the investor comps, which will be the lowest.
This is a very simple approach, which will allow you to see exactly what investors are paying for properties in any particular neighborhood. To give you an example of what I’m talking about, here is a screen shot of some comparable sales for a property that I made an offer on yesterday:
The three values that are circled in red represent the investor comps, and should give you a ballpark estimate of where your numbers need to be in order to make your deal attractive to an investor (in this case, that number appears to be somewhere in the 10k-38k range).
Once you have determined where the investor comps are and what they sold for, it’s a good idea to hop in your car and take a drive by each one of them. This is something that is very important to do especially when you are just starting out and getting to know new neighborhoods. You can look at comparable sales on a computer screen all day long, but to really get a feel for a neighborhood and make sense of the numbers, you need to actually go check the houses out in person.
If you are just getting started as a wholesaler, I recommend doing what I explained above for each and every property you are analyzing. It may seem like a huge hassle now, but trust me when I tell you that the knowledge you will gain by doing so will pay off big time in the long run, and before long you’ll be able to size up a deal in no time at all!