Saturday, November 13, 2010

Real Estate Wholesale Deal a "Go" or "No Go"?

We creative real estate Wholesalers are faced with the "go" or "no go" scenario all the time:
  • Single family 3-bed 2-bath house $400k ARV, $75K in repairs, purchase for $200k and wholesale for $230K - is this deal a "go" or "no go"?
  • Condo 2-bed 2-bath $800K ARV, $30K in repairs, purchase for $600k and wholesale for $650K - you present this to your local REIA for them to judge: is this deal a deal "go" or "no go"?
  • Apartment complex, 140 units, NOI $1,000,000, repairs $300,000. purchase for $1,200,000, and wholesale for $1,400,000 - is this commercial real estate deal a "go" or "no go"?
Usually the answer is determined by the size of your Buyers List, augmented by your network of other Wholesalers who have a Buyers List.  Then, within those Lists are additional factors:
  • What is the purchase criteria for each buyer;
  • Of the Buyers whose criteria match the property characteristics and financials, who is ready, willing and able to buy NOW;
  • If the Buyer is ready, willing and able to buy NOW, how decisive are they?  Often times a Wholesaler will use an option or a contract with a deadline for completion of the transfer of the deal to the Buyer.  If the Buyer is slow, needs weeks to decide, and the Wholesaler needs to complete the transfer within a week then that Buyer is useless.  The "deal" is now a "no deal."
  • If the ready, willing and able Buyer is in the List of another Wholesaler, is there enough of a spread to cover that Wholesaler's desired profit?  Or are the numbers so slim that a joint venture is not feasible?

Of the 3 examples given, which one do you feel is a "go" and which is a "no go"?  If your money was on the line, would you "go" with that deal your are trying to wholesale to others?

But isn't that how life is?  Constantly, whether we are conscious of it or not, we are making "no or no go" decisions.  Take the alternate route to take to bypass a traffic jam, or wait and hope the jam clears soon; accept the date invite from a man who is not the one you were hoping to get the invite from, or sit home of yet another Friday night.  The "go or no go" can take many forms.  For some the outcome is measured in how late they are to the destination, how much fun they have on that date, or whether they make $30,000, $50,000, $200,000, or NOTHING.  "Go" or "no go"? You decide.

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