Question for you wholesalers, Concerning your offer to seller

[Vincent Herrera]

Hey guys how is it going?  I have a question about  making an offer to the seller and the criteria  you used to make the offer . Whenever you estimate your offer  to a seller  do you factor in  closing costs for your buyer?  For example  after repair value  -  repairs  -  around 6-9% for closing costs and miscellaneous  - purchase price  -  wholesale fee? Look forward to hearing your responses. Thanks! 

[Justin Lenk]

Most buyers look for 70% of ARV minus repairs to allow for profit and other costs involved with flipping (financing, sales cost, ect.)

This isn't always the case but just a "Rule Of Thumb".

So when you determine your MAO as a wholesaler it would be ARV x 0.70 - Repairs - Your Wholesale Fee = Your MAO.

So say you have a house with an ARV of $200K but needs $50k in repairs/updates to get it there and you want to make $10k on the deal. It would be $200K x 0.70 - $50,000 - $10,000 = $80,000 MAO. Your end buyer will be all in around $140K (acquisition and rehab) leaving a gross profit of $60K (lower net profit after all other expenses).

Not every deal follows this "rule", bottom line is if the numbers work for an end buyer then you'll move it. If it's not a deal you'll know because you won't have any interest in it.

-Justin