Figuring out wholesale prices to give homeowners

[Christopher Langan]

So Im going to assume this has been asked a million times, but I was just struggling to figure out the ARV and the costs.

I have knowledge on what  and how much X should cost and stuff, but when people explain calculating the costs its more elaborated through writing.

I was wondering if someone could kindly explain it in math form.

Im more of a math guy just fyi. 

For example. I know a house thats on the market for $350,000 and the comps of the neighborhood/area is $325,000-400,000 depending on size, sq ft., etc. 

How would I determine a price I could offer

P.S. This is a distress home as well as a friends home. I dont believe it will sell on the market for that amount.

[Bill Gulley]

Originally posted by @Lee S.:

Originally posted by @Bill Gulley:

@Lee S.

I do understand you logical ranting, even if I didn't read it all in detail.

No, it's not my opinion nor do I set any ethical, moral or legal aspect other than what has already been adopted in the industry or by statute. 

The problem is, very few (if any) "investors" on BP even understand the differences between real property and personal property. One prominent poster, who is well educated formally, must have missed some law courses and ethics in business school, as he keeps referring to car dealers or transactions in private property to compare to those in real property. So, while any are dealing in real property, they don't even understand what they are dealing in at the most basic level, or why laws and society set different expectations for transactions dealing in real or personal property. 

If you want to know the differences, take an educational course outside the world of gurus, who present real property as widgets off an assembly line. Don't take my word for it, ask a real estate attorney, the Dean of Business at Harvard, Yale or your local State University, I'm sure they all know. It's also taught, usually in Chapter One to all licensees in real estate. There, it's usually glanced over, it appears to be one one those, "yes, I all ready know that property is important to the city and state, yes, I already know it can't be reproduced, yes, I  know it's scarce, yes I know it is important to the economy and that property rights are mentioned in our abused constitution". It's one of those chapters that isn't really studied nor remembered. Which is why 99.999% don't get it. But judges get it, attorneys get it, regulators get it, but never mind, you  just never need to understand that part of your business.

Next, we have federal law, various consumer laws, Fair Trade and Services Act takes into consideration pricing of good and services. Most contends with unfair dealing between businesses and mergers, unfair competition, but there are also aspects of competitive pricing and fair pricing for services. This crosses all industries, setting guidance based on services performed being in like type, quality, area of expertise, of service providers having education, knowledge, experience and skills that are expected at any price point. 

Much of that is intended to  keep some dumb azz from representing themselves as experts in some area and overcharging the public when they do not meet the standards within that industry expected, in other words, some dumb azz charging $500 an hour for consultation when his experience, education, qualifications only support $15.00 an hour. It absolutely is not lawful  to go out and misrepresent yourself at any price you think you can cut out of someone's pockets!  

Consider this, I'll use personal property as an easy example. You're at a Farmers Market and you walk down the isle, one farmer has red apples for $.50 each, the farmer across the isle has basically the same red apples but wants $5.00 each. Not going into  economics of having only $5.00 apples left at the end of the day, but that doesn't apply when there are plenty of apples. 

The only way you can sell $5.00 apples to to show or explain the difference in the product, but there really isn't any difference! Implying there is a difference or saying there is when there is not, gets into fair trade issues, deceiving the customer. 

What wholesalers do is no different than a Realtor, those services have an established value for facilitating sales of real  property. When you do  nothing more than provide that like service, but you charge 5 times as much, you're dealing in a predatory, unfair manner. Now, if you touch the property, cure problems beyond what a Realtor does, you can begin adding value to your services, like a contractor or a title clerk or maybe a social worker or an attorney so long as you're not crossing the line of practicing law or any other area that requires a license. 

To value your services look to what you actually provide and stay within the realm of pricing of competitive services based on your level of experience, education and qualified expertise, but in no circumstance in RE are you worth 5 times more, just isn't reasonable. 

And, if you're not satisfied within those pricing constraints, then do more and earn your damn money, don't just expect to peg some price out of the lue because your kid needs braces next week!

I swear, some people can get an education in business and walk out without a clue. If you can't deal fairly, then please, go sell shoes and get the h3ll out of real estate! 

:)                

 I didn't read all of this, not sure why you're responding now to a post 9 months ago but that's ok.  I don't want to go back and read my rant either lol.  I get what you are saying here and I've come to respect your opinion on most things real estate since I made that post.

I know my intention wasn't to defend wholesaling because it's not something I'm into, It makes more sense to me to just get a license which I have done.  I would much rather just buy any deal I can find than to pass it along for a small fee.

I do feel there is a lot of "talking down" to people on the forum, not naming names, but I also understand that this could come from being burned out on dealing with the same issues.  

 I probably got a vote that brought me here and thought it was a recent post, otherwise I wouldn't respond. 

Thank you and glad to hear you're taking the high road, you'll find that it's just as quick and more rewarding, in dollars and professionally. Good luck :)

[Brian Gibbons]

@Bill Gulley

@Lee S.

Doing it the right way following the regulations I think is a great way to start your business. Specially in the Republic of California, don't "poke the bear"

[Jim Keller]

Originally posted by @Brian Gibbons:

@Bill Gulley

@Lee S.

Doing it the right way following the regulations I think is a great way to start your business. Specially in the Republic of California, don't "poke the bear"

All this happy talk........ I work may tail off looking for just the right deal.  Found a guy last week selling his mother's home after her death.  He asked if I would pay 125k, I told him I would pay 150k plus 5k for his family's  cost. He is over the moon for the extra cash and the 5k I released when he signed the agreement for his expences, 2 weeks before our escrow closes

Now the facts..... it will be a minumum rehab maybe 30K and I will sell this home for 335k have I done "WRONG" in the eyes of real estate "educators"  the extra 30K is "preditory" please help me..... I guess I just don't know what I'm doing.  

I operate within the consumer laws and the sellers have the same responsible to understand there rights.  The best thing that ever happened to the major banks was the 25 billion dollar settlement of 5 yrs ago.  They had lawyer after lawyer manuvering for them and the consumer got screwed.  By the way Bill Gates would love to pay $50,000 for his accout in services

Brian we don't have to "poke the bear" it will starve itself the way he is going. 

[Bill Gulley]

That's nice. But it doesn't pass the sniff, so you're say 125-150K profit, on one simple rehab house, yep, that's rippin a good one! Bet you're proud to. 

 Bet most RE investors spend at least 2 or 3 hours a day keeping up with consumer laws, another to see if anything changed last night.

Most think they are from what the hear every 2 or 3 years, it would be fun to have a contest to see who really knows what, most have forgotten and never stayed current, just human nature, folks have better things to do. So, in their minds, everything is great! Good luck. :)

Again, Happy Turkey Day.........now, go shop!