[Rent Rate] x 35: Anatomy of Wholesale Offer for Buy and Hold Investment?

[Jonathan Baker]

Hello all,

Newbie question here. I understand that a typical wholesale deal to a fix and flip investor you're looking at % of ARV - repairs for a wholesale price to an all cash investor.

The rules seem to change a bit when you're considering rental rates. I was told by a buyer that they are looking for properties in specific areas that are 35x rental rates. So I pulled up Zillow, and checked the stats for target area:

Median Home Value: $150,000.00

Median Rental Rate: $870.00

WHAT?! So $870.00 x 35 = $30,450 wholesale price. I have to net out an assignment fee onto of that. Under a typical equation it would be more like $150,000.00 x .70 - repairs which would put us around 90k. Much more "purchasing" power when dealing with the seller.

So how exactly do these deals work?

Thanks,

Jonathan.