How Much Should I Offer On A Wholesale Real Estate Deal?

First off, we are going to talk about wholesale deals. Wholesale deals are where people first cut their teeth in this business. They are the simplest deals. Basically, you find a deal and get some comps on the property. You will find out what other houses have sold for in the same neighborhood. It is public record, and you can find this out at your local courthouse. So, find the deal, get your comps, and make the offer. But, sometimes it’s reversed. Sometimes when you are talking to someone, you can make the verbal offer right then and there to get the deal going. Then after you make the offer and it is verbally accepted, you can come back and get your comps and check out what the real value is. It’s called due diligence. It’s like doing your homework and making sure you don’t get yourself in a hole. You need to do research at this point. Any deal without due diligence, comps, research, or checking things out can get you in big trouble. I suggest you make the offer first though, and get your numbers going so you don’t waste time on deals that never get anywhere.

In most cases, the seller is going to tell you what he is asking for. You don’t have to make an offer or counter-offer on that first call, especially if you are new to the business. If he says he wants $120,000, you don’t have to know right off the bat what it is worth, especially if you are not familiar with that area. There are some areas where I know right away, what the homes are worth. When you are new, that is not going to happen. So, don’t be afraid to accept the offer on the phone and let him know that you are going to do some homework, you are interested in the house, and will get back to him soon. So, find the deal, get the comps, make the offer, get the house under contract, find a buyer, and close. Note that we are not talking specifically about wholesaling here, but that is the gist of it.

We are going to discuss how to know what the right price is. What kind of offer should you make? That is where the ARV comes in. You have probably heard someone ask what the ARV is. The ARV is the Average Retail Value. It is how much those comps tell you how much the house is worth. Once you study the area and find out how much houses are selling for, you are going to get the comps. That is the ARV.

There are two ways to do this, assuming this home needs some repairs. Here is the first option: Let’s take the selling price of the house, $150,000 (which might be the ARV), and you are trying to come up with how much to offer for this house. You are not planning on buying it, but are planning on getting it under contract and selling it to someone else. You have to leave enough profit in there so that someone else can do the repairs, list the house or sell it without listing it, and make their profit back. They have to cover all of their expenses.

One way to do it is to take how much you figure that next person is going to sell it for, let’s say $150,000. Then, you subtract 4-6 months ,worth of mortgage payments that they will have to make while they are paying for that house, subtract funding fees (points), subtract repairs, subtract both sets of their closing costs, subtract taxes, subtract insurance, subtract utilities, etc. Am I confusing you yet? That is why I have a better system for you.

Here is your second option: What we do is we take the ARV in that area, of houses in good condition and subtract 30%. It is ARV minus 30%. Then you subtract how much the repairs are going to be. The rule of thumb is ARV (after the repairs or aka after repair value), minus 30%, minus repairs. Then you subtract how much profit you want to make on the deal. If it is a $150,000 house, don’t expect to make $30,000 or $40,000 on it. You have to leave the $30,000 for the guy who is going in and doing all of the work, making all of the repairs, plus making the mortgage payments. You are just wholesaling this. In my eyes, if you make $4,000, it’s a good deal. I have made $20,000 on homes like these in the past, but usually you are looking to make only $4,000 to $5,000. You are just flipping these.

To recap, you will take the ARV of $150,000 minus 30%. That leaves you with $105,000. Then you subtract the $20,000 in repairs. You are down to $85,000. If you want to make $5,000 in the deal, you are down to $80,000. I would then offer $79,000 to whomever I am buying it from. I would sell it for about $85,000 though.

The bottom line formula is this: After repair value, minus 30%, minus repairs, that‘s how much most rehabbers are looking for. A lot of them are looking for a specific profit, say $30,000. ARV is very universal. Good Luck!

Free Ways To Build A Buyers List In Real Estate Investing

There’s nothing in the real estate business that is better than getting a house under contract by sending out one e-mail or making a few phone calls and having that house sold in a few hours or a day or two.

There are different types of buyers’ lists that you might want to build. There are retail buyers’ lists when you are selling those pretty houses that you have an option on. There are also lease option buyers’ lists. But that isn’t what we are going to cover here. We are talking about how to build a wholesale buyers’ list so that when you get a contract on that junker down the road, that ugly house that you got a deal on, you have somebody to flip that house to quick.

There’s a lot of different ways to build a buyers list. Some that cost a lot of money. I will teach you how to do it for free.

Make your Own Website
First off, I do suggest that you have a website. It can be a one-page website that introduces you as a professional house buyer and seller. Many times I find houses that I can’t rehab myself. Therefore, I like to give others opportunities to buy these houses at a great price. I let them know on my website. They just fill in their information and it comes right back to you on your list. So, when you come up with a new property that you are selling, all you have to do is send out one e-mail that automatically goes to your whole list. I know that it costs some money, but doing it yourself is very inexpensive.
Online sources are a great way to get your list started using free classified websites. Every day, I would post an ad there saying you are selling houses. You will put “Wholesale Properties Available”, or something more creative on there. Maybe something like “The Other Guys Talk, We Walk the Walk”, or something flashy like that. How about “Are you a rehabber? Do you renovate houses for a living? We’ve got the deals”. Direct them to your site or a phone number. You want to do this at least a few times a week so people know that you have houses.

Take Advantage of Online Classified Ads
When you post on these classified sites, you want to use good keywords . You want to put lines in there like, “We Buy Houses”, “Handyman Special”, “Sell Houses Fast”, or “Fixer-Upper”, and you want to put the area you are working in so that when people put the location in and a keyword, your ad could pop right up! So many times I put a search in with the area and up comes a classified ad in the 2nd or 3rd item that pops up. So, go to the sites and let the world know that you sell houses and have the junkers and you have the ugly houses at the right price.

Remember, you are looking for investors who you can assign your contracts to, who will buy those houses from your Seller and you make the spread in between. Make sure your web address, e-mail address, and phone number in there.

Also, put in that ad that you buy houses too. You might have a homeowner or investor who is browsing online who hits that site, and they might have a house for sale. You should always put “We Buys Houses Too” in your ads. It could double the effectiveness of your ads.

Look for House for Sale in Newspapers

Here is the cheapest offline way to build your buyers list. Get the newspaper and go to the House For Sale section. If you see a house that says, “Just Rehabbed”, you know that’s it’s probably an investor who just rehabbed that house and is selling it.

When you are driving down the street and see a sign that says, “We Buy Houses”, go ahead and call them , introduce yourself as an investor in the area, ask them if they do buy houses. Explain that you are a wholesaler and that you get houses at a good price, and you are looking for other investors to take deals that you can’t handle yourself. Find out their price range or area they are working in. Ask them if you can send them properties via e-mail. Find out what type of properties they work with. Or go ahead and add them to your list anyway, because you never know if their needs will change.

Having a buyers’ list could make the difference between you taking a couple days to flip a house or a couple of weeks. Let them know that you also buy houses. Be honest with them and let them know exactly what you are doing. Don’t be dishonest because it could bite you back in the end. I have been let down in the past and will now no longer accept phone calls from some investors in my area. Don’t lie, be honest. Word gets around. Good luck!