Basic Wholesale Formula for Houses - Use this Formula to See if a Deal Has Enough Profit
NOT ALL DEALS ARE WORTH PURSUING - So how can you weed out the properties that will be time wasters?
Sellers might be extremely motivated to sell
but that does not mean you should take every deal - you need to make a profit. Lets learn how to pick deals that are win - win and insure a profit.
MAXIMUM ALLOWABLE OFFER - You must first know the maximum amount to offer a seller.
You can use this basic fourmula to determine your MAX allowable offer to the seller.
(ARV x 65%) - Repairs = MAX allowable offer.
ARV is the after repair value. Basically what the property is worth all fixed
up to be competitive with similar houses ( sq ft, beds and bath) selling in the same area.
60% is the amount an investor will pay compared to the ARV.
The 40% gap covers risks associated with holding a property ( loans, market risks etc... ) while still
still allowing the investor a decent profit.
Repairs are simply the cost of fixing up the property to make it competitive with all the other comparable homes in the area.
EXAMPLE : Say you are working with a seller and determine the ARV = $200,000, and repairs are $25,000.
(200,000 x 60%)- $25,000 = $95,000 is the max allowable offer. If the seller owns the house free and clear or the house is part of a probate that needs to be liquidated the seller will probably accept and be happy to get a nice quick payday. Be sure to ask all the right questions at the beginning before you present your max offer. If the seller owes $100,000 obviously you'll want to pass. There is no profit in the deal. Houses free and clear are what you want to find, that is house wher the seller has no mortgage or owes very little. This is why it is critical to be as up front an honest at the beginning stages of the deal. Here is a great list of questions to screen motivated sellers. Asking these before will save you time and weed out deals that don't make sense... You need to let the sellers know you are ONLY interseted in buying properties at a discount and only if it works for all parties involved. Wholesale prices are significantly lower then retail home prices and for good reason.
More about wholesaling houses for profit: Learn to wholesale houses
Use Craigslist to Find Motivated Sellers
Wholesale Offer Formula
Screen motivated sellers on the phone
Wholesaling Abandonded Ugly Houses
Best Way to Build Cash Buyers List
Find and Assign for Profit Find and Assign Testimonials
(200,000 x 60%)- $25,000 = $95,000 is the max allowable offer. If the seller owns the house free and clear or the house is part of a probate that needs to be liquidated the seller will probably accept and be happy to get a nice quick payday. Be sure to ask all the right questions at the beginning before you present your max offer. If the seller owes $100,000 obviously you'll want to pass. There is no profit in the deal. Houses free and clear are what you want to find, that is house wher the seller has no mortgage or owes very little. This is why it is critical to be as up front an honest at the beginning stages of the deal. Here is a great list of questions to screen motivated sellers. Asking these before will save you time and weed out deals that don't make sense... You need to let the sellers know you are ONLY interseted in buying properties at a discount and only if it works for all parties involved. Wholesale prices are significantly lower then retail home prices and for good reason.
More about wholesaling houses for profit: Learn to wholesale houses
Use Craigslist to Find Motivated Sellers
Wholesale Offer Formula
Screen motivated sellers on the phone
Wholesaling Abandonded Ugly Houses
Best Way to Build Cash Buyers List
Find and Assign for Profit Find and Assign Testimonials