What do buyers want?

Question

Hello everyone,

I was just wondering, what information do buyers want or not want from wholesalers?  I was thinking that when marketing a contract to a cash buyer, you would want to put together a packet of information consisting of basic info on the property/contract, ARV (and the comps that got you there), Rehab estimates and photos.  I am wondering if you think all of this information is necessary and how in-depth it should be.  I want to give enough information to the buyers, so they can make a decision, without giving them so much, that they don't read read it.

Chris Piper · Answer

Keep it simple Matt. People with money don't have time to read through a 10 page break down of a single property. They need the bare bones details. They don't need comps or any of that. They will get those for themselves, and decide if it's a good deal. Also, you need to include a rough estimate for repairs, and price it accordingly.

Here is what I mean: I NEVER go into any houses I buy. I determine repair costs from the pictures. Those pictures either come from the realtor, listing agent, or bird dog. I use 3 categories for repairs: Bad, Really Bad, or Awful. If it's "Bad", then multiply $10/sf. by the square footage of the house, and there is your repair estimate. If it's "Really Bad", use $15/sf. for the same formula, and "Awful", then use $20/sf. Figure out how to determine which of those 3 the house falls under, then you will save yourself TONS of time and you can stop looking at every house, and meeting contractors for repair estimates. It's a waste of time and a HUGE time sucker. You need to focus on getting properties, and moving them ASAP.

Here is an example of how I determine what to offer on a property, and what to sell it at once I get it under contract:

EXAMPLE PROPERTY

123 Main St. Anywhere, USA

3 bedrooms 2 baths 1,500/sf.

(property is in "Bad" shape, referring to the repair condition)

ARV $100,000

Asking Price $50,000

--------------------------------------------------------

ARV X 70%= $70,000- this applies only if you want to sell for $0.70 on the dollar

(you can decide what you want to sell at, and adjust as needed)

-Repairs $15,000 ($10 X 1,500/sf.)

-Closing Costs and Funding Interest $3,000

-Profit $10,000

-Counter Offer Margin $3,000

= Max Purchase Price $39,000

--------------------------------------------------------

ARV X 70%= $70,000- this applies only if you want to sell for $0.70 on the dollar

(you can decide what you want to sell at, and adjust as needed)

-Repairs $15,000 ($10 X 1,500/sf.)

= Sell Price to Buyer $55,000

Ann Bellamy · Answer

Matt, Chris did give you some nice rules of thumb, but as @Shaun Reilly noted, (@message not working for me here) the numbers may work in Indiana, but not in MA, and even though prices are lower in Worcester, those numbers won't work in Worcester either.  So work up your own numbers or use the $20/30/40 or more to start with.

Matt B. · Answer

Thanks for the great advice everyone.

@Chris Piper That was a great tip for rehab estimates.  I'll just have to make those adjustments for the Massachusetts market.

@Shaun Reilly That was definitely noted, haha

Shaun Reilly · Answer

Yes it is much more expensive to do stuff here than in most of the country.

Of course the states median home price is like $325K so that will buy you a palace in most of the country while it gets you a 3/1 1200sqft ranch in a decent town around here.

Chris Piper · Answer

Judging from what some people are saying, it sounds like repair costs are outrageous on the East Coast. Like I said though, adjust as needed. The easiest way to do that would be to get estimates from contractors on your first couple of houses, make a note of what repairs cost approximately how much, then figure out how much per sf. that equals out to. After you get that down, then you can pretty accurately ballpark repairs without going to a property, and feel comfortable making assumptions about the cost of repairs. Of course, you will never be spot on with your estimation, but reasonably close is good enough.

Scott Anthony · Answer

Just to build on what has already been said, I thought I might share my 2 cents.

I have found that sometimes different buyers like different information, and possibly different formats. By "format" i mean, some of my buyers are tech savvy and like email, some buyers may just want a quick text, and others wont respond to anything but a phone call.

So be flexible, and start building relationships. This business is very much about relationships...

Shaun Reilly · Answer

Hey @Matt B.

You are getting some good advice here.  I agree with @Kyle Hipp that you want to have a nicely presented summary with some pertinent information.

I'd include your price, the ARV and a repair estimate as well as the basic specs of the house (#BR, #BA, SQFT, Lot Size, Garage etc.) but not any long winded MLS sounding description.

You can give your comps if asked but as @Joe Gore says people will run their own 99% of the time.  If they don't they are probably newer than you are.  :)

Also @Chris Piper gave GREAT advise and examples for you to save time and effort.  I actually rarely look at a house until I think there is a good chance I will buy it.  I would say especially as you are getting started you will want to see the places and probably try to price out the repairs AFTER you get the seller to the point where it looks like a deal might work.  Use those types of SQFT estimates (Or something similar) as a good screening tool so you aren't wasting time on stuff that will never be close to a deal.

One thing I will say is that the number he gave won't work around here, at least not on a flip.  You could use those if the target buyer for the wholesale is a buy and hold investor in a so so area.  Otherwise you would be better off doing more of a $20, $30, $40 type for those things.  Even that might be low and to start you might even bump those up all $5/sqft.

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I should note I'm the only local guy that has chimed in and I will buy any good deal you get so give my advice more weight.  ;p

Kyle Hipp · Answer

I would make a cover page with the highlights including ARV, repair costs, locations, property information, price. Then have the remaining pages with more detail including your comps, a repair analysis and any other relevant information. I believe this puts the best of both worlds. It gives the bullet points that a buyer will want to see initially but also provide the detail to understand your methodology. I think this will will the important part for you. If you can provide insight to your process the buyers will be able to see your competence.  A smart buyer is going to run their own numbers anyway but it is nice to see where you are coming from.

Account Closed · Answer

A buyer is looking for a good deal, and a smart buyer will run their  comps to see if it is a deal or not.

What do buyers want?

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