What is defined as a "Deal"

[Carl Washington]

I am new to real estate investing and I would like to get started in wholesaing in the Houston area. I have heard a lot of investors say things like "is it a deal" and my question is what is defined as a deal in terms of wholesaling?

[Dennis Rodriguez]

Hey @Carl Washington welcome to BP. There's a good amount of Houston Investors here and I'm sure you will find answers to all your questions here in the forums.

From what I can tell, a deal has to provide you with a profit. Many people have different profit margins or spreads they are looking on a 'deal' so you first have to determine what is the minimum you want to make on each deal. To some people it might be $10K, $15K or even $30K per deal. As a wholesaler, I've read that $5K per deal on your first 2-3 deals should be enough. Now, if you are going to wholesale you need to make sure there's enough spread in the deal to cover your profit and the investor's profit.

An easy way to determine this is using the 70% rule of thumb minus whatever you want to make on the deal. So let's say you are looking at a house with a $100K after repairs value (ARV). You need to multiply that by 70% (0.70), subtract the repairs (let's say $20K) and then, subtract your profit (let's say $5K). So you need to buy that house at $100K x 0.70 = $70K - $20K (repairs) = $50K - $5K (your profit) = $45K. If you can get the house for $45K and sell it to a rehabber for $50K, you have a deal in your hands. As you become more experienced your profit can be more than the $5K used in this example.

Hope that helps,

Dennis