Wholesale Prices

[Kanjos 0]

Please can anyone out there explain this to me?

 

When a buyers state they're "looking for homes with purchase prices of up to 80% of ARV minus the repair cost"....

 

Let's say I have a contract on an abandoned prop for $50K, it needs complete rehab and the area comps are $200K - 250, with rates getting even higher with developers moving in a block away.

 

What does this formula mean "purchase prices of up to 80% of ARV"?

 

And, how do I do figure out in advance what to charge for wholesale/flip. Is the buyer stating they'll pay only a certain amount, minus the rehabbing cost. Please can someone simplify this for me I have 3 props, but need help on how to choose right buyers to get paid at least $4,000 on these props. Do I need to charge $54K to get my end????? Please explain... Thank you in advance.

[Kimberly 0]

First you need to have a fairly clear idea of your local market. What are similar houses (type, size, condition, area) actually selling for -- this is NOT the same thing as the listing price.

 

ARV = After Repaired Value -- roughly what the house would sell for after being rehabbed.

 

So, the formula means just what it says:

After Repaired Value X .80 - estimated repair costs - your assignment fee = the maximum you can offer

 

If they are saying, "purchase prices of up to 80% of ARV." That means that's the most they'll pay. So you're going to have to know not only what they could sell the house for after rehabbing, but also what repairs are needed, and what those repairs are likely to cost.

 

Find someone local to partner with who is willing to teach you.

[Kanjos 0]

Thank you for responding Kimberly and yes I have researched similar houses in my farm area (type, size, condition. actually selling rate as of last 6 monthhs or so and as I stated in my note, they are selling for $250-300,000, not listing.

 

I'm currently farming abandoned/junkers and they generally need a complete rehab. I'm not looking to inspect, rehab, or appraise, merely flip to a real buyer, not someone assgining as myself. Now tell me do I understand the 80% of ARV minue repair cost equals my pay.

 

Abandoned Row house $50K

 

 

Property ARV sells: $ 250K This is not the highest, it's mid-range

Minus repair cost: 100K Estimated high

Equal: 150K

"Minus 80% ARV 30K"

Total Remain 120K

Original cost to buyer 50K

Leaving buyer with: 70K

 

Where's my assignment fee, is the (minus 80%= $30K my fee) or do I charge a set rate of $5-10K so the buyer's investment is worth it, and we can do more business together????

 

Looking for a partner in my area now, I think I've found someone, but don't want to rush into anything, we're kinda feeling each other out. Made and offer to him to team up on a sub-to, we're going to see what we can do. But I get much better answers here at "Naked Investor", you guys go straight to the point and I love that. Thank you so much for your help. I'll be working and waiting.

[Sold ! 0]

Abandoned Row house $50K

 

 

Property ARV sells: $ 250K This is not the highest, it's mid-range

Minus repair cost: 100K Estimated high

Equal: 150K

"Minus 80% ARV 30K"

Total Remain 120K

Original cost to buyer 50K

Leaving buyer with: 70K

 

250K x .80 = $200K.........this is what the buyer is willing to pay for it. Your 'buyers' should be 'rehabbers'. Find them by calling all the bandit signs you see, joining your local REI club, etc. They'll USUALLY only want to come in at 65% or so, by the way.....

 

Repairs - $100K

 

Your Fee = (how much do you want? 10K on this? OK........) $10K

 

$200K - 100K - 10K - 50K (your price to buy it) = 40K to the rehabber. Their Costs to buy from you are $60K...50K plus your 10K assignment fee, then they have to fix it for 100K...

 

40K on a rehab looks like a winning deal to me, even at 80% !

[Guest Guest]

Thanks again for all the help, YES I THINK $10K is a good fee, but on another website I'm being told many other things, some as high as $60K, I think that's kinda high myself, especially for wholesale. I can't see how, I was thing something like this:

 

The seller wants 40K and informed me he owes $5K in taxes for it, I'll have another contractor come in and confirm the repair cost and make sure there are no environmental hazards like mold or pigeon poo... then wholesale to a rehabber/investor for quick the cash. I'm jobless/broke and need it. This will be my job, if I can make one of these properties work.... I have 2 others, but I believe they're much better.... less rehab cost, even better locations.

 

I was also told I could factor the tax amount into my numbers, whereby the seller or buyer pays, my contract has clause whereby I can deduct from the seller's fee. After I have completed another inspection I want to assign the contract immediately and be out of it. Since I cannot afford to get it to a title company or rei attorney asap... because I'm broke, last night I thought maybe if I offer the attorney a promisory note, with alittle more cash involved, he might... Put in a call this AM. This way get better profit, don't you think... Do I have to get it to a title company or REI Attorney in order to assign it to an investor/buyer/rehabber, or can I leave that for the them and collect 15K for the contract, and I don't mean waiting for closing or placing money in escrow. Do investors give up that much cash for assignment contract, provided all my numbers are accurate...... (I tried to lowball the amount.... comps are alittle higher than I've stated, figured better to go low than high),

 

An Wash. DC investor within a newsgroup i attend has offered to walk me through this deal, I'll be calling him today to see what's the offer on the table...I'm sure it's not free.... But i believe i could really benefit from the experience. Pray it's on the up and up

 

I look forward to any of your more experienced thoughts on this, again thank you so much for your advice, thusfar, I look forward to proceeding from this deal to the next, and the next, etc.... At least to build a cash reserve for my REI business. Will be watching for your thoughts.

[Sold ! 0]

Thanks again for all the help, YES I THINK $10K is a good fee, but on another website I'm being told many other things, some as high as $60K, I think that's kinda high myself, especially for wholesale.  I can't see how, I was thing something like this:

That's more along the lines the "rehabber" might expect. Wholesaling $5K - $15K is reasonable.

The seller wants 40K and informed me he owes $5K in taxes for it, I'll have another contractor come in and confirm the repair cost and make sure there are no environmental hazards like mold or pigeon poo...  then wholesale to a rehabber/investor for quick the cash.  I'm jobless/broke and need it.  This will be my job, if I can make one of these properties work.... I have 2 others, but I believe they're much better.... less rehab cost, even better locations.

The "prettier" the houses, the closer you are coming to Lease Option techniques and Cooperative Assignment techniques you'll find here on the naked Investor !

I was also told I could factor the tax amount into my numbers, whereby the seller or buyer pays, my contract has clause whereby I can deduct from the seller's fee. 

You are over analyzing this and making ot too hard. Don't worry about taxes and figuring all that in. That's not for the wholesaler, really. Let the guy who's going to HOLD the property for a while worry about those costs from his "spread."

 

After I have completed another inspection I want to assign the  contract immediately and be out of it.  Since I cannot afford to get it to a title company or rei attorney asap...  because I'm broke,  last night I thought maybe if I offer the attorney a promisory note, with alittle more cash involved, he might... Put in a call this AM.  This way get better profit, don't you think... 

You really shold start a title check process to be able to have a more complete offer for your "rehabber". Come in with a nice package for him and it'll be easier for him to say yes or no. make him do more work for it and you'll lower your assignment fee and become delayed while they are doing their due diligence. Do everything you can to get them to say yes or no FAST. Make them understand that if they don't want it you have 12 guys behind them that might.

Do I have to get it to a title company or REI Attorney in order to assign it to an investor/buyer/rehabber,

SEE above...

...or can I leave that for the them and collect 15K for the contract, and I don't mean waiting for closing or placing money in escrow.  Do investors give up that much cash for assignment contract, provided all my numbers are accurate...... (I tried to lowball the amount.... comps are alittle higher than I've stated, figured better to go low than high), 

They do. But the more complete a package you give them the faster they will buy it if that's what they are looking for.

An Wash. DC investor within a newsgroup i attend has offered to walk me through this deal, I'll be calling him today to see what's the offer on the table...I'm sure it's not free....  But i believe i could really benefit from the experience.  Pray it's on the up and up

 

You might want to partner with him on some deals. He brings the money, you bring everything else. One deal at a time, though. Pick his brains. Even if you have to pay the guy, your education in this business that can change your life, is worth it.....isn't it?

 

 

Best of luck. Keep us posted.