Than Merrill

Flipping Houses: Running The Numbers On Wholesale Deals (Part 2)
by Than Merrill

Wholesale & Flipping Property Deals

In part one of my Running The Numbers On Wholesale Deals series I discussed how important it is to mind due diligence. You must have an idea of how to move forward if you hope to accomplish anything at all.

You must run the numbers to even determine whether or not a deal is worth pursuing.  Before you can even start running the numbers on a property, there are a few things you should know. That’s right; prior to minding your own due diligence you must, well, mind your due diligence.

A proper knowledge base is integral to flipping houses with any degree of success. At the very least, I recommend having an understanding of the following before you move forward with a respective wholesale deal:

  • The seller’s contact info
  • The general information of the property in question
  • The current status of the property
  • The property’s listing information
  • The condition of the property
  • The seller’s motivation
  • Any debts against the property
  • The lowest price the seller is willing to accept

Only once you have this information can I condone moving on to the desktop evaluation portion of my Running The numbers On Wholesale Deals series.

WHOLESALE DEALS: THE DESKTOP EVALUATION

Part 1 of this series determines whether or not the deal you are looking at is a viable lead. By the end of Part 2, however, you should be able to tell if the deal is worth your time, or if you are better off moving on to the next one.

Use the following steps to run the numbers on your next wholesale deal:

Step 1: Confirm The Property Details

Before you can even consider running comps (comparables) on the property in question, you need to confirm that the details the seller gave you in Part 1 are accurate. You must, therefore, take anything they tell you with a grain of salt and discern whether or not what they told you was true. With everything that is on the line, you are only hurting yourself if you don’t follow-up the property’s details.

I recommend pulling the property card, which represents the city’s records about a property associated with a specific deed. The property card should give you insight into the following information:

  • Who owns the parcel
  • What, if any, improvements have been made
  • Sales price history
  • Assessed values
  • History of ownership
  • Land use, zoning approvals, and construction permits
  • Land line valuations
  • Building valuations
  • Construction details
  • Extra features that may be present

Nearly every state, with a few exceptions of course, will allow you to access the property cards of homes online. To find out if the state you are in allows public access, contact the local tax assessor’s office in your area.

If you are in a state that doesn’t allow public access to this information, there is a chance your local MLS (Multiple Listings Service) will accommodate your needs. If you live in a state that doesn’t disclose the information above, you will need to contact the private entity in charge of maintaining real property ownership records, only then will you be able to get an idea of the current state of a property.

Compare the information you glean from the property card with what the seller told you, but be sure to leave some room for adjustment. There is a good chance the numbers won’t match up exactly – and that’s OK. As long as they are similar, you will have an idea of the numbers you are working with. The only time you should be concerned is when the numbers are significantly different from one another. If that’s the case, it may be time to look further down the road for another deal.

Step 2: Pull The Listing Sheet

Flipping Houses: Running The Numbers On Wholesale Deals Investing MLS

In the event the property you are looking at is listed with a real estate agent, you will want to make sure you pull the listing sheet for your records. If for nothing else, the listing sheet will give you important information entered into the MLS by the same agent that is representing the seller.

In obtaining the listing sheet, you will be able to compliment the information found on the property card from the previous step. It is also the best way to understand every aspect pertaining to a property, as agents using the MLS are required to input very detailed information and pictures about the home. Think of this step as another way to confirm the details you are going to work with moving forward.

Step 3: The Sales Comparison Approach

The sales comparison approach, otherwise known as the market approach, is a methodized system put in place to compare a subject property with those that have recently sold. In other words, step three in running the numbers on a wholesale deal involves determining a home’s after repair value (ARV), or what it will be worth once it is remodeled and in pristine condition.

In determining a home’s ARV, I recommend pulling the information on three or four like-type comparable sales in the vicinity of the subject property. I have had great luck looking at properties that are currently for sale or that are under deposit. If no such properties exist in the neighborhood you are currently looking at, pull the most recent sales information of similar homes that sold close by.

My search criteria will typically include the following:

  • Homes that have recently sold, are under deposit or are currently on the market.
  • Homes with distinct similarities to the subject property.
  • Homes that have sold within the last six months.
  • Homes that are less than a half-mile radius away from the subject property.
  • Homes that are 80-120% of the square footage of the subject property.
  • Homes with the same number of bedrooms as the subject property.

Flipping Houses: Running The Numbers On Wholesale Deals Investing 3

Narrow the candidates down to the four that match your property the best, and understand that these homes will be used to determine how much yours will be worth, and ultimately if the wholesale deal is worth pursuing. I have yet to find a better litmus test for determining a home’s potential more so than analyzing the comps.

This portion of the deal evaluation system is designed to give you everything you need to formulate an offer. That said, you can never take a seller for their word; you must mind your due diligence and run the numbers yourself. Only then can you be sure that you are on the right path.

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This is the second intallment of a 3 part series on Flipping Houses: Running The Numbers On Wholesale Deals.

Click Here for: Flipping Houses: Running The Numbers On Wholesale Deals (Part 3)




Than Merrill
Than Merrill, the star of A&E's "Flip This House" and founder of his own real estate company and CT Homes, LLC is one of the most successful real estate investors in the nation. Than is currently buying between 9 and 10 properties every single month and in the past five years he has bought and sold a total of over 350 properties nationwide.

Than is typically referred to as the "Marketing Maven" and he coaches over 2000 active real estate investors around the country. The key to his student's rapid success and his company's exponential growth is the turn key marketing and business systems he has developed which help his students generate leads from both buyers and sellers.

Than's systems are some of the most advanced in the industry and his students around the country are experiencing unheard of success by using the systems he teaches. Than's mantra is derived from the belief that "Business Process Automation" is the key to insuring guaranteed success in any marketplace. Than is totally committed to helping other investors obtain financial freedom by teaching them the principles of smart investing.

Than Merrill is a graduate of Yale University and a former NFL football player. After a very successful college football career, he played two years with the Chicago Bears and Tampa Bay Buccaneers before moving into a career in real estate development. Than Merrill is a national speaker for many Real Estate Investment Clubs around the country and has shared the platform with some of the top speakers in the country including Donald Trump, Tony Robbins and Robert Kiyosaki at the Learning Annex events.


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