Wholesale a Rental Property

[Robert Burns]

I'm working on a deal involving a multiunit rental property that consists of a SF house and 4 garage apartments. Gross rental income is $2650/mo. Owner pays utilities of $700/mo. All units are rented on a 1 year lease and the property is in fair condition with no major repairs needed. My question revolves around estimating the value of the property to make a fair offer to put the property under contract to wholesale to one of my buyers. Do I use the typical wholesale formula of ARV x .70% - repairs - assignment Fee ($5000) or do I also take into account the annual gross rent of $31,800. The sellers are motivated in that they intend to move out of town ASAP due to a job transfer. They are asking $130,000. I intend to offer cash and can close quickly. What offer should I make based on the numbers involved?

[Ryan Wilkinson]

I'd be interested to see what other wholesaler's advice to you is but to me its seems awfully dangerous to use a generic standard formula to value a property. Every deal is different, every market is different so how can you apply a "typical" standard to a variable situation?

In my market pricing fluctuates constantly. Buying at 70% of ARV may be fine one day (actually it wouldn't...need bigger discounts) and be a big loser next week because the market has moved & prices have fallen. Having a knowledge of what your buyers are paying is most important.

To a large degree wholesaling is based on the greater fool theory. Your goal is simply to find someone who will pay a little more than you did.

Do you have buyers in mind already? Do you know what they are paying for properties like this? Have you comped the area to see what other cash buyers are paying? Do you actually have the cash to close or do you need to use some kind of bridge financing? How much time will the seller give you to shop it to your buyers and is that enough time to reasonably sell it?

I would be more focused on questions like these than what math formula to use to value it. If you can answer these questions you will know what you can pay because you will know where you can sell it & how fast you can do so.

Wholesaling in its purest form is more an art form, than a science.

But that's just me...I'm all ears on this one...