IS THIS A GOOD WHOLESALE DEAL?

Question

I just signed a contract with a seller than I intend to wholesale. The property is located a suburb of Detroit (yeah I know) that's mostly blue collar but is growing and has a low crime rate. Anyway here are the details:

- Single Family 3/1.5 Vinyl Sided

- 2.5 Car Detached Garage

- Full Basement (partially finished)

- 1440 sq ft/ Lot size 40x105

- Taxes are $1200 per year

- ARV  is $72,000 (Based on MLS Comps)

- Move in Ready with only about $2500 in renovations that could be scheduled in over the next year or so

- Tenants already in place, but below current market rates

- I'm getting it for $50,000

Would this be a good wholesale deal?

Ned Carey · Answer

Yes I suspect it would be a good deal to wholesale to a landlord. However it depends on your market. If there are deals this good or better  all over then perhaps not. If deals are tight it might be a very good one.

OK I just noticed that you didn't mention the rent. I thought the rent was $1200 a month but I see that is the taxes. This is a pretty tight deal for a rehab and flip. Without knowing the rent, there is no way to know if it is a good deal for a landlord.

When evaluating a deal

Important

• Rent
• ARV
• Repair cost

Unimportant

• bed and baths
• siding
• garage
• basement
• size

All the things mentioned under unimportant are already taken into account in ARV or rent amount.

Based on ARV this is a tight deal with no room for a wholesale fee for a flip. Without knowing rent, it can't be evaluated for a wholesale to a landlord. If you don't know the rent all those things under unimportant and the specific location would help someone local to you estimate the rent.

John Horner · Answer

Based on the market rent that's a pretty good deal for a landlord investor.  You'll be just under the 2% rule in a low crime, working class neighborhood with some equity to sweeten the pot.

However, you still didn't mention the current rent.  If it is renting for $600/mnth now and the investor has to honor that lease for another year you're going to have a real issue.

Patrick L. · Answer

It might be an Ok deal for a buy and hold investor but there's not a lot of room left for someone trying to fix and flip it.  I'd figure a minimum of a $5k for a cosmetic rehab to flip it (I know you said $2500 but if you're trying to sell it you're going to have to paint and do other cosmetic updates).  So with an ARV of $79k - $5k in repairs a rehabber would probably be in the $50-55k ballpark.

Bobby Jobs · Answer

John,

The current rent is $825. The lease expires on 31 July. The tenant has been told by the seller that the new owners will be looking for current market rates. No word yet on what the tenant plans to do.

Thanks for the feedback.

Bobby

Bobby Jobs · Answer

Thanks Wendell. I appreciate the feedback and the spreadsheet.

Bobby

Wendell De Guzman · Answer

Bobby,

I put the numbers in my Cashflow Analyzer (see below). You might be able to wholesale it for $60,000 - or a $10K profit. You need to present it to the landlord in the ff. way: he can make 24% CCR, putting 20% down and at $60K, it's $19K below market value as well.

By the way, you can download my spreadsheet in the File Place...

Bobby Jobs · Answer

Thanks for the advice. Good learning points. The market rent in the area (Roseville, MI) is $1010. This was based on a report pulled from Rentrange.

J Scott · Answer

If tenants are already in place, presumably you want to wholesale to a landlord.  But, you don't mention the market rent.  Without that, there's no way to know if it's a good deal.

Bobby Jobs · Answer

I need to make a correction folks. The ARV is $79,000 and not $72,000.

IS THIS A GOOD WHOLESALE DEAL?

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