Today, let’s chat about wholesaling deals and making sure the price is right for each one. Real estate comps give you an idea of what each deal should be worth to you. So the question becomes, how do you decide what is the right price for your deals?
1- Determine the After Repair Value (ARV). The best way for beginners to determine ARV is to use real estate comps. You will want to know the comparable price per square foot of similar houses (within 10% of size) in the subdivision. Analyze a set of the lowest comps in the area and the highest comps of the area. Remember when making an offer, seek out the lowest comps in the subdivision.
2- Calculate the repairs. Take a trip, look the property over, and determine what repairs may be needed. As a rule of thumb, it is a good idea to figure in a set amount of repairs when making an offer. If the amount of repairs turns out to be significantly higher than you originally set, then you may need to walk away from the deal.
3- Put in an offer. Keep in mind that you are making offers that will benefit you and your business, so your asking price will be lower than what most people’s expectations are. It’s safe to say perhaps 5% of your offers will be accepted. It is a good idea to construct an offer that will allow your end buyer to profit. Many new wholesalers make the mistake of not caring about the end buyer. Your end goal should always be a win for all involved.
My next post will wrap up our wholesale deal information. I want to talk more about your buyer and your fees you collect.