Finding an ideal Wholesale/Rehab neighborhood

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Finding an ideal Wholesale/Rehab neighborhood

Dan Miller
Washington, Washington D.C. · Member since 2008 · 91 posts · 2 votes

I am new investor, focused on getting that first deal done, and I'm following a system in which you focus on one specific neighborhood, using a realtor and MLS, "in your own backyard" that consists of "ugly" homes in need of repairs.

Unfortunately, where I live (Northwest DC) and work (Northern VA), there aren't too many ugly homes, and most of the investors I have met at the local REIA (which is in MD) focus on Baltimore and Maryland, including my mentor. Both of these areas are VERY difficult for me to explore given that I have a full-time job right now and they are in the opposite direction (plus DC traffic is no fun). There are some neighborhoods in Northern VA that were built post WW2 era (50s) that I think could be promising, but I'm not sure.

Would you suggest going to MD where I know other investors/rehabbers are (but is tough for me to get to) or farming in those 50s neighborhoods in NoVA, where prices are higher and I know fewer rehabbers working?

Really in need of some advice here so that I can going.

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  • Account Closed
    Minneapolis, MN · Member since 2008 · 691 posts · 12 votes
    18y

    Have you investigated any of the nighborhoods you like for potential pre-foreclosures? Those homes may not necessarily need repairs but could have motivated sellers, upside down loans, divorces, relocations, etc. I would suggest picking one that has alot of middle class houses, that you can get to reasonably, at least on the weekends dso it doesn't tax your job, and start your research, and marketing. Good luck, Mike

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  • Dan Miller
    OP
    Washington, Washington D.C. · Member since 2008 · 91 posts · 2 votes
    18y

    Thanks, Mike. That's a good idea. I know of some areas that have A LOT of foreclosure issues, but I've heard from other local investors that these properties are less desirable to fix up and resell since there are SO MANY on the market just sitting there. They may be more desirable to buy and hold though.

    I have found a middle class neigborhood that fits your description and is still selling fast, so rehabbers would be more likely to want it. However, if major repairs aren't needed, I wonder if my pricing formula breaks down. Currently, I take the ARV*.70 - repair costs - wholesale fee to determine my max allowable offer. The homes in my market have ARV of 350-500k where I'm looking (that's the DC market and there even higher if look closer to the city). Thus a 30% discount is a big chunk of change (we're talking a maximum offer of 350k on a 500k property even before capturing my fees and repair costs. The basis for the 30% discount is that's what Hard Money Lenders lend (70% of ARV).

    Thoughts?

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  • Jeff Fairchild
    Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
    17y

    Wholesale investors sometimes get $2,000,000 homes for $1,000,000. It doesn't matter if the house costs $500k use the same % discount.

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