Is the 65% of ARV rule Definite?

[Neil J.]

Hello my real estate family,

Is the "65% of ARV" rule engraved in stone? Should I not waste my time on a seller or "motivated seller" that is just not budging on the extra 10-20k I need to make the property meet the 65% of ARV? Should I not have them sign?

I would just like to know how serious these numbers are to most cash investors.

Any inputs or opinions welcome!

[Devan Mcclish]

Neil J. Not every investor is the same. Some look for 30% returns and some look for 15% returns. Personally, I would never touch a flip if I didn't come out after its all said and done with more than 30k. That's a bare minimum for me. But I know investors who are fine with 15k a flip. There's a buyer for everything remember that! You should also evaluate the deal from a buy and hold standpoint. Maybe you can wholesale it to another investor who wants to hold it. You can also give the owner the price they want but on your terms (owner financing or sub 2). Then you can hold it or wholesale it. Don't throw away money because it doesn't fit your criteria. Chances are it fits someone else's criteria. Also, evaluate it from a wholetail standpoint. Can you buy it for 75% of market and sell it for 90%

[Neil J.]

Wow, thank's a lot Devan,

You've definitely answered my question in full!

[Troy W.]

@Neil J.Ok I'm going to try to knock 2 birds with 1 stone....Ready? Let's go....

No, nothing is ever engraved in stone when it comes to Real Estate Investing. 

As a wholesaler, you main position is to get sellers under contract at a discount, and enough where you can make your money, the buyer makes a handsome profit, and your seller get what they want.

 However, if a seller is not motivated...then guess what my friend?...yes your guest it...they are not motivated.

 You have some buyers that will buy at 80% max, some at 70% max, so where does that leave you? It leaves you at having buyers that meet certain price points.

For me, and this is just how my business model is...is that I have buyers with ROI/ARV price points and/or profit margins.

I.e. for the wholesale side of my REI business, because I see you are a wholesaler - my buyers want 40k- 50k profit in one part of the city, and 85k - 100k profit in the next... and That's PROFIT.

You will find that dollars out way %'s any day!

So here is what most wholesalers miss out on that makes some wholesalers like me stand out.

 Most buyers have no problem letting you make your money. You can have a 20k assignment deal, as long as, the profit margin is good for your investor buyer.

A lot of Wholesalers you will see out there will print this in a deal... I see it all the time...and I will look something like this: Don't do this... learn early!

ARV: 100K

Rehab: 15k

Wholesale: 65k (Assignment fee 5k)

Profit: 20k

This is the furthest from the truth....

Your deal should include:

ARV

Rehab cost - Tell what the cost is -  Roof, kitchen, floors etc

Real estate Agent Fees from the Flip Sale

Monthly Holding cost

Closing cost ( from the Purchase Closing Cost/ and from the Flip sale)

After all this is my Profit

I hope this helped.

[Troy W.]

@Devan Mcclish 

Way to answer...

[Ryland Taniguchi]

Originally posted by @Neil J.:

Hello my real estate family,

Is the "65% of ARV" rule engraved in stone? Should I not waste my time on a seller or "motivated seller" that is just not budging on the extra 10-20k I need to make the property meet the 65% of ARV? Should I not have them sign?

I would just like to know how serious these numbers are to most cash investors.

Any inputs or opinions welcome!

 You need to talk to cash buyers and other buyers and find out what they want. As a wholesaler, you are getting people what they want. 

Also, I have gone as high as $20 k EArnedt money in Seattle (Prices average around $500 k) if I want to lock down a great deal. In comparison, I may go $100 if it's a marginal deal like 15% below market value.

Finally, depends what buyers you have and the market. I have a "realtors real estate team as well and we have many retail buyers. The issue with wholesaling to retail buyers is that you can't get traditional financing these days on an assignment contract. So what I do is I take a 6% real estate commission instead of the wholesale fee and do it like any other FSBO transaction (not a pocket listing which we can't do in Seattle as a realtor).

[Neil J.]

Hi Troy W.

That was very detailed and filled with a lot of great points; I definitely see your point on how actual profits margins out weighs percentage.

Thank's a lot for the advice