How To Calculate a Wholesale Offer

[Danielle Levins]

Good morning BP community,

I have a really quick question regarding making offers to sellers in a wholesaling transaction.

How should we calculate the offer that we make to a motivated seller?

Typically I've been told that we should offer 70% of the home value minus any repairs and marketing fees. Is this a good approach or is there a more simple method of calculating an offer??

All advice and critique welcome!!!

[Trey Watson]

There is no set percentage for a wholesale deal. It all depends on neighborhood and demand. But I will give a hypothetical situation below. 

'IF' you need to sell a deal at 75%, this is a quick, condensed way to look at it:

1. I need to sell to investor at 75% of ARV (Purchase price+rehab) in this particular area.

2. Hypothetical ARV= 200K. So 200 x 75%= 150k. So I need to sell to investor at 150k (Purchase price+rehab)

3. Determine rehab (Hypothetical)= 40k.

4. If purchase price + rehab= 150, to determine investors purchase price, Subtract 40k(rehab) = 110k

5. You now know you must sell to investor for 110k to achieve a 75% deal. 

6. But you need to make money, so subtract what your fee is, and that is your offer price to seller. If I want to make 5k as my fee: 110k Purchase - minus - 5k wholesale fee = 105k offer to seller.

Does this make sense?