wholesaling

[Clifton Walker]

I recently listened to 2 different podcasts and heard 2 different investors talk about equity when purchasing homes to wholesale.  Can anyone explain why equity is or is not an important factor in determining whether you should purchase a property or not when doing wholesaling.

[Jeremy Ferguson]

@Clifton Walker first we need to determine what "much equity" and "decent profit" is from your post above. If you stick to the formula:

ARV x 70% - repairs - your fee = your offer

So say you have a property with a $100,000 ARV and the seller owes the bank $87,000.

With the seller only having $13,000 in equity, there is no way they can let this property go for any less than what they owe. This is the spread that @Will Barnard mentioned. This is what you and the buyer will be splitting. In this example I gave, I would walk away.

Now let's say the scenario were a bit different and the seller owed $30,000. Now you have a little more wiggle room between what the seller owes and the ARV. Not to say the seller will always let the property go for that amount but that's a good starting point if they're motivated enough.

Hopefully this helps.