How to wholesale rental properties?
Wholesaler · Pittsburgh, PA · Member since 2024 · 11 posts · 4 votes
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.
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.
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.
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.
Hey Mitch!
Thank you very much for that answer I will look into all of this further.
In your opinion should I first line cash buyers for deals like that to understand if they use any finance at all or buy with cash?
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.
Hey Mitch!
Thank you very much for that answer I will look into all of this further.
In your opinion should I first line cash buyers for deals like that to understand if they use any finance at all or buy with cash?
As a wholesaler, you're going to want to deal primarily with cash buyers for TWO important reasons:
1. You want to able to (double-)close quickly.
2. You don't want to be unable to complete a transaction because the investor-buyer wasn't able to secure financing.
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.
Hey Mitch!
Thank you very much for that answer I will look into all of this further.
In your opinion should I first line cash buyers for deals like that to understand if they use any finance at all or buy with cash?
As a wholesaler, you're going to want to deal primarily with cash buyers for TWO important reasons:
1. You want to able to (double-)close quickly.
2. You don't want to be unable to complete a transaction because the investor-buyer wasn't able to secure financing.
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.
Hey Mitch!
Thank you very much for that answer I will look into all of this further.
In your opinion should I first line cash buyers for deals like that to understand if they use any finance at all or buy with cash?
As a wholesaler, you're going to want to deal primarily with cash buyers for TWO important reasons:
1. You want to able to (double-)close quickly.
2. You don't want to be unable to complete a transaction because the investor-buyer wasn't able to secure financing.
My pleasure!
One last thing: I *think* I've found you on LinkedIn, but I'm not 100% certain without a matching photo. I'd strongly encourage you to make it easy to be found and cross-referenced across the social media platforms you use. BiggerPockets is great for real estate networking, but you're missing out if you don't leverage the sheer size of platforms like LinkedIn to start building business credibility. Your future self will thank you!
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.
Hey Mitch!
Thank you very much for that answer I will look into all of this further.
In your opinion should I first line cash buyers for deals like that to understand if they use any finance at all or buy with cash?
As a wholesaler, you're going to want to deal primarily with cash buyers for TWO important reasons:
1. You want to able to (double-)close quickly.
2. You don't want to be unable to complete a transaction because the investor-buyer wasn't able to secure financing.
My pleasure!
One last thing: I *think* I've found you on LinkedIn, but I'm not 100% certain without a matching photo. I'd strongly encourage you to make it easy to be found and cross-referenced across the social media platforms you use. BiggerPockets is great for real estate networking, but you're missing out if you don't leverage the sheer size of platforms like LinkedIn to start building business credibility. Your future self will thank you!
I didn't think too much about socials because I don't really use them, but I do want to make them for my business, because I'm new to this and have only been doing it for a week I mainly focused on doing a deal...
But you are right I should start my business & personal presence on social platforms, especially after a few sellers asked about my business and where they can find me...
Thank you for that great tip I'll make sure to do so!
There are different types of cash buyers for rentals:
When vetting buyers ask what are they looking for when buying a rental. The rates below are avg for my market.
Cap rate buyer: 6%
Gross yield buyer: Around 12%
Percent rule buyer: 1% of purchase price min should be the rent value
All in % buyer: 75% ARV