Determining wholesale price?

[William Manzie]

Good evening all,

Reading reading reading! On podcast #43 in two weeks. 

Thank you!

So listening to the podcasts I think I will be pursuing the wholesale niche to start and work my way to flipping. 

I by no means am ready to start yet but that is where I think I will start. 

So now for the question. 

Assuming I was to find a deal, how do I determine, how do you determine the wholesale price?

Do you work a formula? Do you work backwards from the flippers goal?

This is what I came up with working backwards with made up numbers. 

ARV= $200,000

Multiply by = 70%

Subtract rehab costs = $15,000

Final wholesale price = $125,000?

If the home was picked up from a motivated seller at $90,000, should we determine wholesale price to be the $125,000 or should I say I would like $15,000 in profit at go from there $105,000?

Again these are just hypothetical numbers to help me understand the logic behind pricing a wholesale deal. 

Thank you all for looking and any help you could provide. 

Bill

[Andy M.]

@William Manzie as a professional wholesaler I'm here to tell you that the answer is AS MUCH AS THE MARKET WILL BARE. Every buyer has different criteria, and your job as the wholesaler is to find the best buyer for you (i.e. the one who will pay the most). This isn't a popular answer with flippers. Flippers will always be buyers for your wholesale deals, but landlords pay more. Oh, and sometimes developers pay the most. :) 

I know that wasn't the answer that you were looking for. You wanted a formula of some sort, so yes, to most flippers 70% of ARV - repairs is what they want to pay, but definitely remember that that is not always in your best interest. Inexperienced wholesalers just shoot for a certain fee, experienced once ask what the market will bare.

This video (https://youtu.be/UdPegwsbTqM) is a GREAT example of maximizing a wholesale fee. I got a 45k wholesale fee on a property that would have probably only yielded 10-15k more if I had gone though all of the time and trouble to flip it. I'm not sure what my buyer saw in the property, but he paid me top dollar so it made best business sense to wholesale it rather than flip it.

p.s. I'm not a heartless professional wholesaler who over inflates values and lies on repairs,  and I don't prey on new investors, but if the buyer is a "big boy" I don't try to get in his head and determine why he would pay the price he pays.

Hope that helps. (oh, and Marina is also a good person to ask. ;) )