What makes a property a good wholesale prospect? My first and shortest answer is that it has to show that it can make enough money to get a real estate investor’s attention – and even more to make it worthwhile for you, as the middleman.

Remember that the greatest risk belongs to whoever does the rehab and then either sells to the home buyer, or rents the property out. The rehabbing investor gets the greater share of the profits, often twice what the wholesaler will make.

Criteria #1 is to satisfy your target investor who will buy (or be assigned) this property from you. Get to know what your local real estate investors expect in the way of profit. An investor can work just as hard on a small-dollar project as a large-dollar one, so the dollar amount matters as much as the percentage of the capital needed to buy and rehab.

Criteria #2 is to make it worth your while. A benchmark is to allow the investor to earn twice what you do. But you can divide up the profits in any way that satisfies everyone’s needs.

1)      Property description, location and ARV

The fastest sale to the home buyer is most likely to be a property description and ARV (After-Repair Value)that fit the profile of the highest number recent sales. Offer your investor a great sale prospect with lots of clamoring buyers.

A property with wonky characteristics that can mean a longer wait for the right home buyer to come along – next to the railroad tracks, backing busy road, etc. – is still a good prospect if the profit will be so substantial, the investor can’t afford to wait.

Check my blog post “Know the ARV” to learn more about the After-Repair Value factor.

2)      Realistic and firm estimate of rehab costs

How much is it really going to cost to get this property move-in ready, to the ARV? Get a good estimate from a contractor,as if you were the one rehabbing and selling it to the home buyer.

3)      The flipper’s selling costs of 4.5% to 7.5%

4)      All other carrying costs – utilities, insurance, interest on the investor loan, etc.

This is where your investing mentor can be an invaluable information source. What’s the smart cost factor for the local area, to carry this property to the final sale to the home buyer?

Is this prospect a good deal? The opinion that matters most is your target buyer, a real estate investor who will fix it and either flip it or rent it. Keep their needs and concerns uppermost in mind and present them with a deal they will not pass up!

What is your most critical factor in assessing a rehab prospect?

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