Why I Told Him Not to Wholesale This Deal

2

A friend of mine who’s a newer investor sent me a deal to evaluate for him. The seller was motivated and my friend thought it would be a great wholesale opportunity. He was telling me that his next REIA meeting was coming up and he was excited to be able to go the front of the room and present the deal, which he was sure would be snapped up in no time.

But after I looked at it, I told him that he should definitely not try and wholesale this deal and he should definitely not present this property at his REIA meeting. Why? It’s simple. The numbers didn’t work.

Listen, I am no math genius and I need a calculator to do pretty much any calculation. However, learning how to wholesale real estate is not difficult at all if you know how to run (proper) numbers. For instance, the property my friend showed me, when all was said and done, was being offered at 80% of ARV.

In today’s market and in fact, in almost any market…

If you aren’t offering me and other savvy investors at 60% or below, we’re going to want nothing to do with you. For example, if you’ve been in this business for a couple months, I’m sure you’ve gone to your REIA meetings and you see the same people go to the front of the room month after month and present bad deal after bad deal.

These people have lost all credibility and as soon as I get an email from someone like this, I’ll immediately delete it because I know it’s going to be a terrible deal. My point is, the investing business is more closely knit than most people realize. If word gets out that you don’t know how to put together a profitable wholesale deal, then nobody is going to work with you.

It doesn’t matter how much you like the house…

Or how desperate you are for the money. Take emotions out of the equation and ask yourself. “If I was a rehabber would I want to buy this deal myself? Am I leaving enough money in this deal for the rehabber to make a solid profit?”

If the answer is no, then do yourself a favor and move on to the next deal. Don’t try and force a bad wholesale deal on others, because it will erode your reputation faster than you can imagine. And if you don’t know how to run the numbers on a wholesale deal, what should you do?

Well, BiggerPockets has more information than you’d ever need on this topic. If you spend just 30 minutes on this website today, you’d learn the formulas you need, to be able to determine if a property is worth wholesaling or not.

About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.

2 Comments

  1. clifton walker

    I know how to calculate the MAO: 70% of ARV-repairs- my fee($5000).
    But how do I calculate how much I should offer deal to buyer for?
    with the MAO I will know what amount to offer to seller, but what amount should I offer to buyer so that we both make a sizable profit?

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php