Than Merrill

Flipping Houses: Running The Numbers On Wholesale Deals (Part 3)
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 perforn due diligence. You must have an idea of how to move forward if you hope to accomplish anything at all.

 

Wholesale deals have become synonymous with due diligence as we covered in part 1 of this series; you only have yourself to blame if negligence results in failure. That said, it’s no coincidence that the most prolific wholesalers in the last decade are also the most diligent in their efforts to analyze a deal. Those who want to experience any degree of sustainable success should, therefore, take the appropriate steps to ensure they can properly evaluate a subject property before committing to it.

Fortunately, it is entirely possible to mitigate risk and place the odds in your favor. Establish proven systems and solidify your knowledge in a specific area before moving on, and you will find that how running the numbers on on part 2 of this wholesale deals series is an essential part of any transaction that doesn’t need to be overly complicated.

That’s why every step up to this point has essentially laid the groundwork for whether or not a deal is worth pursuing, as opposed to taking it head on; you must know what to expect before you even take on a project. To do anything else is a practice in ignorance.

At this point, you should already have an idea of how to identify important market metrics (Part 1) and spot a potential deal (Part 2). In the third part of my series on wholesale deals, you will learn how to take due diligence to a whole new level. Once you have narrowed down your search results, you must visit the property to confirm everything you have learned up to this point. At this stage of running the numbers, it is on you to evaluate a subject property and the “comparables” in person. Only then should you finally commit to the deal.

Inspecting the Deal

Wholesale & Flipping Property Deals Inspection

Prior to visiting a subject property, I highly recommend driving by the home with the intentions of learning more about the entire neighborhood. Again, this method is more about familiarizing yourself with the street and the houses closest to the subject property more than it is about the deal itself. Take note of anything that stands out, good or bad, and discern whether or not it will impact your impending acquisition.

After you feel you have a good understanding of the neighborhood, proceed to drive by the comparables you landed on from your research in the second part of this series. Again, take note of the condition they are in, the houses in close proximity, and the overall feel of the neighborhood. Remember, you want to discern whether or not it is similar to your subject property and if it will help you determine an accurate after repair value (ARV). Subsequently, you need to be able to prove to any potential rehabbers that may be interested in your property that he or she will be able to make a profit should they follow through with the transaction.

Local Market Trends

At this point, I encourage you to dig a little deeper than what the homes are physically showing you. Listen to what the local market metrics are telling you. Take note, for instance, of how many homes are for sale. If for nothing else, prices will be determined by the amount of available inventory.

By the time you are ready to return to the subject property, you should have a good idea of what it will be worth once repairs have been made to it. Again, the more accurate your comparables are, the more likely you will land on an accurate ARV to give to potential rehabbers.

That’s not to say that each comparable you decide to use will be a perfect representation of the subject property; there will always be discrepancies between your property and those you are comparing it with. That said, the accuracy of your ARV is more contingent on predetermined categories you have decided to make adjustments or improvements on rather than the property as a whole.

Adjust Your Numbers & Make An Offer

It’s important to note that the adjustments you make to the value of each property are not simply the cost to construct that feature, but rather what a buyer will be willing to pay for said feature. Never assume the features you adjust will return 100 percent of their initial cost. In fact, they rarely will. It is therefore imperative that you understand how much people are willing to pay for the improvements you make. Only then will you be able to determine an accurate ARV. The adjustment value made will depend on the price points of the properties you are examining, the market you are in, and the relative difference between the properties.

Wholesaling properties and flipping real estate investment deals are a great way to get started in real estate investing and build a profitabe real esate investment business. Remeber to perform due diligence, run the numbers, check the comparables and make the best possible offer you can to make the most out of your real estate deal - BEST OF LUCK!




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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