Thanks for bringing this discussion here, ​@Jason Withmore! I’m glad you opened the floor for it.

I’d love to hear what others think as well - your perspectives could really help spark new ideas and approaches for everyone in the community. Who wants to jump in and share their take? ​@Peter Osmanski ​@Zoerene ​@Cory Boatright ​@Tom_Williford ​@Oscar Darden ​@Wigens Gedeon ​@Jeff Jacobs ​@Max Rigler ​@Ruben Jimenez ​@Savannah Gaines ​@MichelleMcCormickHomes 

Yes, absolutely.  I am spot in with my ARV, rehab budget, solid comps and just lost one of them yesterday.  I was even super conservative and every investor I talked to fought me and all passed on the deal.

Needless to say I’ve actually been pretty upset even today because I know whoever purchases the home that for whatever reason isn’t in my investor pool (personal, on Investor Lift even using my own buyers/rent buyers and AI) never stepped forward to take over the assignment will make a fortune on the flip.

The property is a solid fix & flip with a huge margin and I’ve actually wholesaled a lot in that very neighborhood so that was even more frustrating.  Whoever comes in after me will make a LOT of money.  

I worked so hard on that dispo and couldn’t get it done.  I did everything possible.  Followed up with everyone at least three times or more in multiple ways.  I reduced the price and reduced my assignment fee, sent out a new marking campaign, then reached BACK out to everyone personally to see if even THAT would spark new interest.  Nope.

So I am open to any new ideas from anyone else, because on this last one which I know is SOLID, I exhausted every avenue possible.  I’ve had multiple in a row like this over the last few months, this one is just an example because it happened yesterday…..

Right now, it’s harder to wholesale deals. Basically if you look at your wholesale deals you will notice that you average buying at 53-58% of value and sold to cash buyers for 59-67%. The higher end is in higher demand areas and metros. Those SAME homes were selling for 7-10% higher last 12-24 months. Cash buyer need to buy 10-15% deeper to get THE SAME PROFIT. We had to pivot to more to selling via RBP Transactions. In other words, wholesaling to FHA and VA Buyers that come from listing our wholesale houses on the MLS. The owner signs a listing agreement and they use us as their marketing and management team; e.g “RBP Manager”. 

This works on about 25-30% of all wholesale deals that will qualify for loan. The rest need too much repairs to qualify for government backed loans.

To simplify, if you have a seller that agrees to sell 60% or less you likely have a deal. If it’s is higher you likely do not unless it’s in a very highly desirable area or by an ocean or mountains.

Another thing you should do is look at PENDING not just SOLD Comps.  And build your underwriting off the AS-IS Value not the ARV.

On the one I lost yesterday there were three solid sold comps within a 3 street radius that all sold within the last 6 months.  For reference we had ours a 4/3 at $850,000 and the ARV is a solid $1,200,000 or more. 

Ours has a pool, outdoor kitchen and built in grill, private lot backing the greenbelt, tons of mature palm trees and landscaping, large yard.  The others have none of that, were 3/2, sold at $1,200,000 so we were conservative at matching that ARV with ours having an extra bed and bath.  It’s only straight a cosmetic flip, not a true fixer.  And even THEN every investor passed.  

So it seems no matter what you do, where you are, no matter how you pivot, things are tough.  Unless as I mentioned, someone else has another idea I’m missing!

Really appreciate you both sharing.
​@MichelleMcCormickHomes I can totally relate. It’s honestly the worst feeling when you know a deal is strong and it still won’t move. Sounds like you did everything right. I’ve had a few lately that I was sure would fly, but buyers just aren’t biting like they used to.

​@Cory Boatright your breakdown is very useful. That shift in profit expectations is real, and I hadn’t really thought about RBP strategies like that. Definitely going to look into it more.

Feels like we are doing the right things, the market’s just different now. Anyone else having success shifting strategy or moving deals in other ways?

On homes that are $700k or more it’s even harder right now. 

Just spoke with a major buyer in Florida the other day. He mentioned he’s currently sitting on eight fixed properties that he can’t sell and is being very cautious about any new deals he takes on.

We also recently ran a survey on the buyer side, and one clear outlier emerged: the primary reason they’re not purchasing more properties is the current low profit margins (to ​@Cory Boatright’s point).

​@Cory Boatright ,what market are you in? Because here in San Diego in beach areas (where I’m located) it’s pretty hard to find a home under $800k that’s not a fixer….. a small 3/2 that’s move in ready will run you around$1,100,000 on average.

Of course every market will be different, I am in Chicago so it certainly doesn't have the appeal of San Diego or warrant the higher prices, so this may not apply. I have been told by multiple buyers - sophisticated ones doing 40+ flips a year that they are passing on anything that isn't 65-70% of ARV, all in. That calculation includes purchase price, rehab costs, holding costs, and the assignment fee. So I have seen a tightening up for sure. 

ARV and estimated rehab costs are critical elements, but they are subjective. As we have all experienced, you can ask 5 investors for ARV and repair cost estimates on the same property and you will get 5 different answers every time. 

My pivot has been to smaller rehabbers who have higher risk tolerances, at times they do more of the work themselves, so their rehab costs can be lower because there are less labor costs. I have found some of them by seeing they previously bought rehabs off the MLS, those prices are often higher. Some are reluctant to work with wholesalers, but not all.

I am not suggesting that 65-70% rule applies in every market or even for every buyer, it is just feedback I received. If you can, try to get that same feedback from your buyers.