Wholesalers and their price/est rehab cost/ (MAX) arv

[Brent Cullipher]

I keep seeing wholesalers list their deals along with exit strategies.  Something that always rubs me the wrong way is when I see their asking price, then estimated rehab costs, then the MAX arv.  Why would someone list a MAX arv?  I'm sure they are not listing the max rehab cost.  Anyways, I tend to see the rehab cost and mentally add on 5k or so, conservatively, and by the time I'm looking at their MAX arv, there's only a $10k-$15 spread left.  Again, all I'm doing is being conservative by assuming there will be higher rehab costs and not expecting to see the highest arv.  What concerns me is this "predetermined spread" that's left.  Does anybody else feel this way?  Undocumented/unnoticed issues can ea up that small a spread easily and close the gap quickly. Thoughts anybody? Or is that the unspoken general rule of thumb in San antonio?

[Seth Teel]

I have bought several properties from wholesalers and wholesaled more than 100 properties here in San Antonio. The biggest thing to realize is that both ARV & Rehab Budget are subjective. If I take 10 investors to the same house each will come up with a different rehab number. Likewise if I ask 5 wholesalers to run comps and pull an ARV on the same property, I will likely get different ARVs, and different price-per-square foot. This is not to say that any of these numbers are incorrect. It's no more incorrect than difference in value from two different appraisers.

The best way for you to hedge your bets is to always run your numbers conservatively.  If you are comfortable with the potential profit on the worst case scenario, then do the deal. If you're not, keep looking.  It's also important to make sure you're educated and as well informed as possible.  You need to be the expert, not the wholesaler.  Many wholesalers have little to no real estate experience, let alone ever done a rehab project themselves. That being said, it doesn't preclude them from bringing you a good deal.   Interview your wholesalers, test their knowledge, ask about their experience.  A good wholesaler will always be concerned with good numbers, because they want your repeat business.