April 14, 2024

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Mad about real estate

Wholesaling Real Estate…property Locators

Real Estate Wholesaling Overview
What is a Property Locator?
Determining After Repair Value (ARV)

Real Estate Wholesaling Overview

The Wholesale Real Estate business has been around as long as people have bought and sold real estate. In good times and in bad, there is always money to be made buying real estate at a discount and selling it for more than what it’s paid for.

A true Real Estate Wholesaler purchases real estate as low as possible and resells it at a higher price to other investors. Typically, the investors that purchase from a wholesaler are in either the retail or rental business. This means that once the investor purchases the property from the wholesaler, they will make necessary improvements to the property and then either rent it out, or sell to those who wish to live in it.

Most Wholesale Investment companies hire what’s known as a Property Locator to identify, locate, evaluate, and secure discounted real estate. Once the Property Locator secures a deal that meets the investors buying criteria, the investor quickly purchases and resells the property for more than what he/she paid.

Commissions are generally paid in one of two ways. The Property Locator is paid a flat commission when the wholesale investor purchases the property, or the Property Locator gets paid a percentage of profit based on the resell of the property.

Whether you’re a Property Locator or a Real Estate Wholesaler, there’s a lot of money to be made in the real estate investment industry.

What Is A Property Locator?

A Property Locator identifies, locates, evaluates, negotiates and secures discounted real estate for an investor to purchase. Property Locators use the following three factors to evaluate a piece of property.

After Repair Value (ARV)
Cost of Repairs
Wholesale Property Price

All properties are evaluated and offers made based on the above factors. A property is only a “good deal” if it can be bought for the “right price.” Successful property locators know how to arrive at the right price for a property by determining its

After Repair Value, estimating the Cost of Repairs, and using these two figures in a simple formula to derive the Wholesale Property Price.

Determining After Repair Value (ARV)

The method commonly used by real estate agents and appraisers to determine the market value of a property is called Comparable Market Analysis, or CMA, the appraisal being more complicated and detailed. We use here the simpler method preferred by agents. Comparable Market Analysis is based on the assumption that houses in the same area of similar size, number of rooms and other features will have similar market values.

When the comparable properties are all the same size, finding the ARV is easy. The more alike the comparable properties are the better. When the “comps” are not identical to those of the subject property, there is a method for determining the approximate After Repair Value based upon the average price per square foot of the comparables.

To calculate the average price per square foot of your comparables, divide the selling price of each comparable property by its square footage to derive the price per square foot. Add the prices per square foot of all your comparables together and divide by six (the number of comparables) to get the average square footage of your comparables Although the average price per square foot method of estimating the ARV is not as accurate as a good appraisal, it is reliable enough for our purposes.

Note: The approximate square footage can be calculated by measuring the length of the outside of the house by its width. Tax records can also be checked to find out the square footage, although they must be verified to be correct, since tax records do not always reflect remodeling and additions that have take place over the years. Do not count unheated spaces such as attics and porches.

Best regards,

Peter Vekselman

P.S.
To get started as a Property Locator with The Real Estate Arena, follow the link below: