Wholesalers ARV and Repair pricing

[Brandon Cronkhite]

Hey BP Fam, I’m about a month and a half into my pursuit of my first fix and flip in the DFW area in Texas. Here’s my issue, I’m finding plenty of opportunities and what I’m finding is that when I personally go out to the property my repairs opinion is coming in 20-30k higher than what the wholesalers are figuring. For example:

home ARV based on average comp: 250,000

My opinion to gut and renovate: 75,000

My offer: 130,000(250k x80%, -75k repairs)

Wholesalers list: 160,000 

Wholesalers Repairs: 30,000

-So what am I missing? I figure it’s one for two things: 1-I’m seriously misdiagnosing repairs, or 2-I just have to keep going until I find the deal that matches my numbers. Any and all opinions and suggestions would be massively appreciated! 

[Chad Matthews]

Hi Brandon -

The deal of a lifetime comes along every 15 minutes - so be careful when others are giving you numbers that don't add up. By nature, we all skew numbers in our favor - and wholesalers are no different. I have always used a metric of only paying up to 70% of after repair value. That is, I determine what 70% of the after repair value will be, then I subtract repairs from that number, and offer that number. This has worked in my area for me - and helps to mitigate the unseen things that can pop up. 

These margins allow me to sleep at night, pay for repairs rather than do them myself, and even have a property sit a little longer than I've planned if needed.

Always always always double check numbers and always ask yourself about the motivation of the person who is supplying the numbers.

Good luck.