Wanna Be A Wholesaler But Not Sure If You Have a Good Deal?

[Wendell De Guzman]

Wholesalers are often times the laughing stock of the real estate industry. Why? They sometimes pitch as deals properties that will not make money to a rehabber or landlord.

The gurus are partly to blame. They portray wholesaling as something that can be done easily - by people with no cash, no credit, no experience and even with no effort. Hence wholesaling has attracted the laziest & most unethical people out there who want to make easy money.

But, as I discovered in my own real estate investing career, wholesaling is NOT easy. Newbies generally do not succeed in wholesaling because in some sense it's more difficult than other real estate strategies out there. Why? 

With wholesaling, you got to get a deal BETTER than what other real estate investors get. Your deal has to be so good that you got to get it cheap enough that even when you put your $5,000 or $10,000 wholesale fee on it, it's still a good deal to a rehabber or landlord.

With wholesaling, you got to know how rehabbers and landlords think and analyze their deals. With wholesaling, you got to know how rehabbers estimate repairs and how landlords estimate repairs. With wholesaling, you got to know what matters to a rehabber vs. a landlord. In fact, the best wholesalers I know are rehabbers and landlords themselves. They know what a good deal is to a rehabber and to a landlord.

So wholesalers and wholesaler-wannabees, here's a tool I created to help you determine whether you have a good wholesale deal. Before you pitch that wholesale deal to BP Nation, find out first if your deal is something that a rehabber or landlord would want to buy. Here's the LINK in BP Fileplace:

https://www.biggerpockets.com/files/user/Mister4closure/file/do-you-have-a-good-wholesale-deal

Here's a Screenshot:

All you need are 6 pieces of information: (enter them in GREEN cells only)

1) ARV or the After repair value of the house. This is what similar houses in move-in condition sell for in the neighborhood where the house is at.

2) Repairs

3) Your purchase price (not your sales price)

4) The real estate taxes for the year - rehabbers need this to calculate the holding costs

5) The median rent of similar houses in the neighborhood where your property is at (similar bedrooms). You can get this information from rentometer.com or by asking your local real estate agent to give you the median rent using your local MLS.

and 6) What type of area or location your property is in? Rehabbers usually succeed in areas that are"A" or "B" but they have a hard time moving properties in C, D or F areas. Landlords on the other hand cares more if the property will cashflow and what will be their cash on cash return. There are landlords for different types of areas - even Ds and Fs.

Once you put these 6 pieces of information, see the Assessment section - and if it say's "This deal is not a good wholesale deal" it's not a wholesale deal and you got to get the price lower or walk away from the deal.

On the right hand side of the spreadsheet, I also put the analysis of the deal based on what a rehabber will see and what a landlord will see. See below:

Lastly, the spreadsheet has a second tab which shows the definition of the areas - how would you know if the area is A, B, C, D or F. Here's the screenshot of the second tab. As you can see below, knowing the historical appreciation rate, cap rate, crime rate, etc of an area is crucial in determining what type of area it is. You can find some of these information in NeighborhoodScout.com.

So wholesalers - both experienced and newbies, try the spreadsheet. In literally a few seconds, you will find out if you have a good wholesale deal or not - and to whom you should pitch your deal to (landlords or rehabbers). Let me know if the spreadsheet works in your market. Here's the LINK again for you to download it and start using it. 

If you need more help in analyzing your deal let me know.

You're very welcome!