Why the 70% rule does not work with wholesaling

[Jacob Michal]

So when i first started wholesaling last July i was using the 70% rule minus repairs minus my wholesale fee to calculate all my deals, I quickly realized i was getting burned on my deals, Deals i would pass up on other people would pick up and make 10k+ wholesale fees on and just left me wondering what am i doing wrong.? The truth of the matter is when you are wholesaling there are a few things you need to consider,

1.) each buyers repair estimate is going to be different 

2.) some buyers are just going to get the property livable instead of fully remodeling it 

3.) Some buyers are going to do the work themselves so they don't spend as much on the rehab 

4.) If your in a competitive market you will get burned on so many deals, some buyers will pay more then 70% on their deals especially in high priced markets

So you might be wondering what do i do then .? Well there is not one set answer but the best thing to do is really take the time to learn you market and more importantly network with your buyers to see what they are buying and what they are buying for, Another way that is my favorite way is looking on the MLS or Propstream to see what the cash sales are in the area and try to be below the cash sales. You ca also see what percentage landlords are buying according to the rent rule, For example in my market i have seen buyers buy 1.2-2% of rent in Louisville, Kentucky rather the just the 1% rule, Even though some do still buy at 1%. So there is not really one set answer or formula to use you just have to figure out what buyers are buying for in your market and really learn your market to figure it all out, the best advice i can give you is fail forward.!