How to wholesale rental properties?

[Jacob Lileev]

Hey guys

!I'm curious about how you analyze and wholesale properties that make sense for rentals.
I'm calling a tired landlord list, and I've seen a few times that landlords want to sell their rental properties because they're tired.
These properties are currently being rented for a great amount with great cash flow.

Most of the time, these properties are not in the worst condition, but they are not new either (I think about $10-20K in repairs needed) or even properties that have great tenants paying great rent in them.

Now, if I analyze the MAO with the standard calculation (ARV * 0.7 - repairs - fee), it won't make sense for the seller, and he won't sell it (found out the hard way haha).

What do you guys do in that situation? Are you calculating your MAO differently?

I know sub2 might be better in those situations, but I'm focusing 100% on wholesaling and nothing more.

[Mitch Messer]

Hey @Jacob Lileev!

The MAO formula (70% of ARV Minus Repairs Minus Wholesale_Fee) only makes sense for fix-and-flip deals.

For rental deals, you'll need to calculate the metrics that matter to a landlord, starting with Cash Flow and Cash-on-Cash-return.

To do this you'll need to estimate Income and Operating Expenses to get Net Operating Income (NOI). From there you'll need to determine Debt Service (if it's a financed deal) and Capital Expenses, to then calculate Cash Flow.

The Cash-on-Cash Return (CoCR) will just be Cash Flow divided by the All-In Investment (Purchase Price + Renovations + Closing Costs + Wholesale Fee).

If you're wholesaling these deals, I recommend you aim to offer your buyers a Cash Flow of no less than $250/mo and a CoCR of 10% or higher.