All Forum Posts by: Marcel Pean

This question may be more specific to my market of Washington DC but maybe you can still help.

I recently attended a REIA where a rehabber presented his latest flip and the entire process. At the end he shared his financials.

3 bed / 3.5 bath, ~1,500 sf rowhome in an up and coming neighborhood in NW DC. 

ARV - $660,000

Rehab - $135,000 (He really spent $175,000 but that's because it sat longer than expected plus a few hiccups)

Purchase - $365,000

Based on what I've learned from REIA meet ups and about wholesalers, typically you determine purchase price and wholesale fee using the following formula:

(ARV*70%) - Repairs - wholesale fee = Purchase price

($660,000*0.7) - $135,000 = $327,000. That's not even with me taking out the wholesale fee! As a wholesaler I would have offered the seller anything under $327,000 because I would assume that a rehabber wouldn't purchase it for much more than that. Am I getting my numbers confused? Am I missing something? This is a situation that comes up for me fairly often. Should I really be offering more and how can I justify offering more?

Any feedback on this is greatly appreciated. Thanks in advance!

@Tyrone Hardy this is the answer I got from @matthew botos:

Zillow, Trulia, Redfin, etc. all lag behind MLS and won't have all its listings. But for comps, you're just looking for a few similar (square feet and beds/baths) places within a few miles in the last 6-12 months. Sale price is the more important number.

@Matthew Botos Thanks a lot for your clear response. This is the answer that @tyrone hardy and I were looking for.  Thank you.

When analyzing a wholesale deal, you look at comps to determine the subject property's ARV. Since I am not a licensed real estate agent I search for comps using the filters on real estate websites that show only recently sold properties.ÃÂ Which tools are you using to find comps if you don't have access to the MLS? How do you make sure those comps are accurate and reliable? Which number is more important, sale price or price/sf?

Thanks in advance!

When analyzing a wholesale deal, you look at comps to determine the subject property's ARV. Since I am not a licensed real estate agent I search for comps using the filters on real estate websites that show only recently sold properties. Which tools are you using to find comps if you don't have access to the MLS? How do you make sure those comps are accurate and reliable? Which number is more important, sale price or price/sf?

Thanks in advance!

Hi BP,

I have a very specific question so I'll try to keep it simple.

There is a seller that wants to sell their house "yesterday." It is currently on the market for $750k after a $50k price reduction. It is being sold in AS-IS condition. I went to visit the house with the seller and it needs mostly cosmetic upgrades, a new layout in the common spaces and probably a new floor (finish floor not floor structure). I estimated this ARV to between $900-$950k based on the average sales price of similar homes in the area in the last 6 months. I want to make an offer between $500-$550k for it.

The house next door, which is a similar style, has 1 less bedroom, 1 less bathroom and no pool, sold a few months ago for $705k. It was also in AS-IS condition and was listed on the MLS.

Should I raise my offer price to match what the house next door sold for or stick to the $500-$550k range? The goal is to wholesale this property and for me to buy it at $700-$750 would mean an ARV of $1M. There is a house in the neighborhood a few blocks away that is on sale right now for $899k and it is slightly bigger and updated. To my inexperienced mind, $1M ARV seems a bit high.

Thanks in advance for any feedback.

-M

Peter Vekselman see reply above. Thanks.

Peter, thanks for your comments. I'm not going to do that deal simply because I am not familiar with that and I don't understand it. 

However, he did approach me with a property that is about to go on the market. It is a distressed property near a metro station in a quickly gentrifing neighborhood in DC. I am going to do my own research to see if it truly is a deal but the contract he sent me is not short 2-3 page wholesale contract but a 26 page document. He's told me before its an assignment but I'm wondering if it really is a double close. Basically I would "buy" the house and then sell it to another buyer. 

Thanks in advance!

A realtor that I recently networked with mentioned he has a client that wants to buy a house in the market I live in but the client is currently out of state and is waiting for a moving expense package from his job to purchase the property. The client will eventually move to my area but doesn't want to lose the house. Therefore, the realtor suggested I sign a contract that has a few contingencies such as, I can walk away from the deal if the house doesn't meet inspection etc., and sell the house to the endbuyer for a bit more than I bought it. The wholesale fee is essentially for holding onto the property for an undefined amount of time.  Has any wholesaler ever done this? Have any realtors partnered with a wholesaler to do this? Apparently it is legal and the contract would be written in a way to reduce risk and still earn about as much as the traditional way of wholesaling.  Thanks in advance for the feed back!

A realtor that I recently networked with mentioned he has a client that wants to buy a house in the market I live in but the client is currently out of state and is waiting for a moving expense package from his job to purchase the property. The client will eventually move to my area but doesn't want to lose the house. Therefore, the realtor suggested I sign a contract that has a few contingencies such as, I can walk away from the deal if the house doesn't meet inspection etc., and sell the house to the endbuyer for a bit more than I bought it. The wholesale fee is essentially for holding onto the property for an undefined amount of time. 

Has any wholesaler ever done this? Have any realtors partnered with a wholesaler to do this?

Apparently it is legal and the contract would be written in a way to reduce risk and still earn about as much as the traditional way of wholesaling. 

Thanks in advance for the feed back!