OfflineOk. This applies to wholesaling a house, not a fix & flip.
Just about every video on Youtube and all the emails and advice I've gotten from others don't say anything about including 12% holding costs (realtor commission, etc.) when analyzing your deal and presenting it to your buyers. Now, we're hearing that we should. If we do, it seems like that would drag down the numbers further, making how good the deal seems to be even worse. I mean 12% is quite a it.
Now, how do you figure that 12% in your deal? Do you multiply 12% by the arv, the amount after repairs are taken out, or ? Thank you for your help with this. 
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Because you use the formula:
ARX (x) 70%, Minus Repairs = MAO
The 30% left over should breakdown as follows:
20% for Profit
10% Holding/Closing costs
Am I right bout this? I think I may have answered my own question. I found this article that explained it a little better. Please check it out, and let me know what you think. Thank you.
http://thebaltimoreinvestor.wordpress.com/2008/05/28/the-maximum-allowab...
You multiply ARV X 12%. This includes commission, utilities, holding costs, etc. This amount is included in the buyers spread.
Example: $100,000 ARV, Repairs $10,000
ARV X 70% = $70,000
Repairs = 10,000 So wholesale it to your buyer for $60,000
He can sell it for $100,000.
Holding cost 12% = 12,000
Repairs 10,000
Purchase price 60,000
Net Profit 18,000
This is how it was explained to me. Hope this helps.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
Your profit would be the difference in percentage off ARV you bought it for and the percentage off ARV you wholesaled it for. I forgot to mention the profit part.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
All of these numbers/mathematical equations look good & sound impressive
but in the real world would an investor really buy a property for 60K, put in
10K for repairs & 12K for holding costs ... only to make 18K profit ? I would
not lay out 82K of my cash, go through the time & effort of a rehab (with all of the aggravation) to only make 18K; in fact to move the property quickly I would sell it at 90K, leaving only 8K profit. Remember you want to make 10K just to wholesale, with none of you own cash into it, I think most investors would take offense to this & that's why so many are not able to get deals done.
I don't want this to sound negative, I'm just being realistic & looking
at it from my prospective, an investor that pays cash, rehabs & flips.
I was just using round numbers as examples to keep it simple.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
you have to look at these deals from the end user investor's point of view. If you run the numbers and YOU can make money wholesaling but the investor can't make the spread that he wants, then you'll never sell the deal. Some properties just can't have another layer of costs from the wholesaler as it skews the return for the investor. The other thing right now is that there are so many deals available, that a wholesaler, assignor and/or birddog has diminished value as investors can find their own. The real value of a wholesaler is to bring you deals when the market is tight; I think that is also the reason that a lot of deals fail right now.
Always Looking to Acquire Houses | Always Looking to Amaze Investors
I think you're right. They're on every corner of every street with 12 in the middle!!! I just saw one on CL for $5000. I called and talked with owner's secretary and she said he lives in another town and just had so many he wants to get rid of some. I'm going to look at it and if hasn't been burned or completely demolished, I'll lock it up!!!!
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
the actual projection costs for the holding costs instead of a percentage, but YES, holding costs DO need to be accounted for! Please see a detailed post I have about this here: http://www.deangraziosi.com/real-estate-forums/buying-foreclosures-reos-...
Fix and flip involves a lot more risk than wholesaling, so it is VERY important to take holding costs into account. If an investor who fix and flips or fix and holds even, doesn't account for the holding costs, they are going to be in for a massive reduction in profit; and if you're making more than them as the wholesaler, you'll have a very dissatisfied customer; however, the fix and flip investor should take into account these costs themselves. But, it is a must if you want to find deals that will satisfy your fix and flip buyers (or if you are bird dogging for them for that matter).