New to Wholesaleing

[Beatrice Temi]

Hello, I could use some suggestions and ideas. I am just starting in wholesaleing and would like to know if it is wise to put out an LOI on a property that's only 59K and a fixer upper to wholesale. The seller is selling as is. What should my average fee be for wholesaleing for this number? Thank you

[David Ramirez]

Hey @Beatrice Temi, 

I would highly recommend learning more about wholesaling and the fundamentals before trying to do a deal. I wouldn't mind jumping on a quick call to explain the fundamentals.

You shouldn't make offers on properties just because you think the price is low; there's a lot more to consider. When running numbers for a property, you need to analyze its potential, starting with understanding how much it could sell after renovations, better known as the After Repair Value (ARV). To determine the ARV, look at comparables in close range to the subject property. Aim to find at least three remodeled properties similar to yours to get a good understanding of what it could sell for. Then, you need to analyze how much rehab the property requires. If you're not sure how to do this, you might be better off partnering with someone experienced or someone who can provide estimates in your area, considering factors like square footage, mechanical needs (roof, HVAC, electrical, plumbing), and the type of remodel (cosmetic, needs work, or full gut). After you have these two figures, you can calculate your offer. Once you have some experience, determining these two numbers should take no more than 15 minutes.

In my opinion, if you are just starting out and don't have a solid buyer's list, your offer should not exceed 65% of ARV minus repair costs, so you can sell at 70%-75% of ARV minus repairs. This depends on your market and the margins investors expect from flips. For example, in Florida's metropolitan cities, investors are typically happy with a 20% spread, but an hour outside these cities, investors usually look for at least a 25% spread.

Essentially, as a wholesaler, you determine your fee by knowing how much an investor is willing to pay for a property and then reverse-engineering from there.

NO LOI!! if you are submitting an offer send an AS-IS Purchase and Sale agreement.

Best of luck!