How to Analyze a Wholesale Deal in 5 Minutes
Learn the exact napkin math to analyze a wholesale deal in 5 minutes using ARV, repairs, and the 70% rule.
What you'll learn
Learn the exact napkin math to analyze a wholesale deal in 5 minutes using ARV, repairs, and the 70% rule.
Key points from this tutorial
- Step 1: Find ARV — First, get the After Repair Value. That's what the house sells for fixed up. Look at three similar sold homes. Adjust for differences. That's your ARV.
- Step 2: Estimate Repairs — Next, estimate repair costs. Walk the property. List everything. Get a contractor quote. Then add ten percent buffer. Always.
- Step 3: Apply 70% Rule — Now the 70% rule. Multiply ARV by 0.70. Subtract repair costs. That's your maximum offer to the seller. Stick to it.
- Step 4: Your Assignment Fee — Your assignment fee is your profit. Usually five to twenty grand. Subtract it from your max offer. That's your actual offer price.
- Step 5: Run the Numbers — Example: ARV $200k, repairs $30k. $200k times 0.7 is $140k. Minus $30k repairs equals $110k. Minus $10k fee equals $100k offer. Done.
- Step 6: Check Buyer's Profit — The buyer will pay ARV. They make thirty percent profit. You make your assignment fee. Everyone wins.
Deal analyzer
The 70% rule keeps a cushion for your buyer's profit and closing costs. Offer the seller at or below your max offer, then assign the contract to your buyer at the MAO to bank your fee. Always confirm ARV and repairs with local comps and a contractor.
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Frequently Asked Questions
What is the 70% rule in wholesaling?
The 70% rule says your maximum offer should be 70% of the after repair value (ARV) minus repair costs. This leaves room for profit and unexpected expenses.
How do I estimate repairs accurately?
Walk the property, list every issue, get quotes from contractors, and add a 10% buffer. Use online calculators for rough estimates but verify with pros.
What if my offer is too low for the seller?
If your offer doesn't meet the 70% rule, explain your math. If they won't budge, walk away. There are always more deals. Don't overpay.