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How Much Of A Discount Do Real Estate Wholesalers Need?

by blogger1
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on Thursday, 01 July 2021
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What discount do wholesalers need to make offers on homes, and turn a profit?


There is a lot of misinformation about how much house wholesalers should pay for properties and make offers for. This can be a major detractor for sellers and agents selling to wholesalers, as well as for wholesalers themselves, when out there searching for deals and making offers.


Be wary of old rules of thumb. Especially in a fast changing market, and when what’s happening out there can be so different from one local market to the next. You don’t want to short yourself on the volume you could be doing, or get stuck and go bankrupt holding deals you paid too much for.


How Much To Offer

Formulating offers is actually quite simple as a wholesaler. You take how much your end buyer will pay, and subtract your costs of doing business and desired profit margin.


End resale price - (costs + profit) = acquisition offer price


If you secure your buyer upfront in this way, then you already know your exit price, and can use transactional funding to finance 100% of your purchase and closing costs.


Build Your Buyers List

The key to this is building a big and growing buyers list of qualified buyers.


Then get to know them intimately well.


Understand The Market, Not Just The Headlines

Everyone loves to quote the big media data points. Yet, in the back of all of our minds we know that we shouldn’t be trusting tabloid news. And it's all tabloid and fake news today.


You have to know the real local market as it is on the street.


Know how much properties are worth to retail home buyers, based on what they can afford and finance. Know how much they are worth to landlords, based on their desired yields and calculations. Know the discounts that house flippers need to be safe and profitable in the current market.


Summary

It really doesn't matter if you are buying properties off of the MLS at peak prices, as part of a bulk pool of REOs, or a direct to seller, direct mail find or inherited home. The math is still the same. Be wary of being too glued to rules of thumb in dynamic markets. Know your buyers and you’ll know your offer prices.

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