An example wholesale deal

[Denny Le]

Hi BP!

I have a question about wholesaling. How would I make this a good deal?

Fair Market Value: $200,000

Mortgage Left: $170,000

Would I do 70% of $200,000 - After Repair Value?

so I would have to offer $140,000-ARV?

Thanks for anyone's help!

[J Scott]

Originally posted by @Chris Piper:

EXAMPLE: $200,000 ARV (after repaired value)

X70%= $140,000

-$20,000 Repairs (example repair cost)= $120,000

So, $120,000 is what you need to sell to a cash buyer for. Keep following.

$120,000

-$20,000 Commission (your example wholesale fee)= $100,000

-$12,000 (6% of ARV) Closing costs, interest, points, etc= $88,000

So, $88,000 is your MPP(max purchase price)

If you use the 70% rule, you don't need to subtract out the $12K at the end. The 30% discount off ARV accounts for both fixed costs and profit (about 15% each), and the $12K in agent commissions would be part of the fixed costs.

So, the MPP would be the $100K number if ARV is $200K, repairs were $20K and the wholesaler fee was $20K ($200K * 70% - $20K - $20K).

This is assuming you're using the 70% rule...you can certainly be more conservative if you want to be...