Wholesaling Multi-family formula

[Moshe Dahari]

So I was at a local REIA meeting the other day and they talked about the basic formula for wholesaling which is Max Offer = 65% ARV - Repairs - Assignment Fee.

The guy was saying that this formula is typical of single family homes and not so much of multi-family homes. He was saying that you need to look at rate of return on the units as a consideration to find a Max Offer price. Is anyone familiar with this?

[Ned Carey]

SFHs are generally valued at what a homeowner, would pay for it. Multi family homes are valued on the income they provide.

A basic number used is Cap rate which Blake Nelson described. Cap rate is the net cash flow return you get if you paid all cash for the property. The cap rate investors are looking for determines what they will pay.

Now if that multi family need repairs just like a single family you work backwards from what it is worth in good condition.

What is it worth when stabilized?
Minus how much time will it take to get there?
Minus how much will it cost to get there?
Minus how much additional value an investor expects for that time and financial cost.

There are a lot more variable factors and that makes it harder to create a formula or to pin a specific number down. It is also harder to wholesale a commercial property because they are more complex deals.

Good luck - Ned