as a wholesaler or aspiring wholesaler one of the most important skills you can learn is how to effectively determine the correct offer price with each distressed property that you find get that right and you make money get it wrong and you lose money and waste a lot of time and the biggest mistake most wholesalers make is they only use one method or formula to determine the offer price this results in a lot of missed opportunities so on today's video I'm going to show you more than one way to calculate your wholesale offer price but first if you don't know me my name is Jerry Norton with 20 years experience I make millions of dollars a year wholesaling and flipping houses and here on my YouTube channel I show you how to do the same so if you want to be a flipping Genius Like Me and live your dream life subscribe to my channel and watch my videos when it comes to analysis never lose sight that your role as a wholesaler is to find source and bring deals to cash buyers that fit their investing strategies a buyer's purchase criteria is often referred to as their buy box now I refer to the price of buyers willing to pay as the exit price it's the price you exit the deal as a wholesaler your profit as a wholesaler is the difference between the exit price with a buyer and the contract price with a seller so if you have a contract with a seller for let's say 100,000 and the exit price is 110,000 your profit is 10,000 now I'm going to use several examples to illustrate this so keep watching but that means your wholesale buy formula is actually very simple exit price minus your desired wholesale fee equals your Buy price it's actually not very complicated figure out what a buyer will pay subtract your desired wholesale fee and what's left is your wholesale Buy price for example if you know that a cash buyer will pay $200,000 for a particular property and you want to make a $20,000 fee your Buy price needs to be $1 180,000 simple right the challenging part is figuring out what buyers are willing to to pay aka the exit price so let's discuss how buyers underwrite deals the better you are able to understand buyers and what they want the better you will be at securing winning deals when it comes to distress real estate the general rule is that buyers want a discount from the value how big of a discount depends on a number of factors such as the neighborhood the amount of repairs needed the difficulty to renovate the turnaround time the income potential the amount of capital needed and a whole number of other reasons but at the end of the day it really comes down to why the buyer wants the property and their intended use your job is to figure that out now luckily we can lump buyers into basically three categories flippers landlords and Retail buyers or what I call do-it-yourselfers now there are variations of each of them but let's discuss some general commonalities of the three different buyers for distress real estate flippers need the biggest discount because because they spend the most money doing renovations and they're looking to make a substantial profit as fast as possible a flipper is price driven the bigger the discount they get the more money they will make now general rule is that flippers want to be Allin on a deal for 70 to 75% of the after repair value or arv that gives them enough margin to cover soft cost such as financing closing and commissions and of course profit so for example let's take a property that has an AIS value of 350,000 that needs about 50,000 in renovations that means technically the arv would be 400,000 well if the arv of a deal is 400,000 then after purchasing and renovating the home a flipper who invests at the 70% formula would need to be all in on the deal for 280,000 so if the repairs are 50,000 The Flipper would need to buy that deal for 230,000 now a simple Fix and Flip formula would be arv * 7 70% less repairs equals the flippers Buy price so again 400,000 arv * 70% minus 50,000 in repairs equals 230,000 as the Buy price so that would be the exit price if you brought that deal to a flipper who follows a 70% buy formula and since the wholesale formula is exit price minus desired wholesale fee if 230 was the exit price of The Flipper less 20,000 in desired wholesale fee means 210 would be the wholesale Buy price or what we often call the maximum allowable offer or Mao so going backwards if you got a contract with a seller on that deal for 210,000 you would wholesale it for 230,000 to The Flipper who would spend 50,000 in renovations and be all in on the deal for 280,000 which is 70% of the arv of 400,000 now if that doesn't make sense go back and watch that again but here's the thing thing not all flippers follow the 70% formula what if a flipper follows a 75% buy formula well it would be arv * 75% minus repairs equals the flippers Buy price so if that were the case with our example then 75% of 400,000 is 300,000 minus 50,000 in repairs equals 250,000 as the exit price and with a $20,000 wholesale fee the wholesale Buy price or Mao would be$ 230,000 that means the flip who follows the 75% formula on this deal can pay $20,000 more for the deal than the flipper who buys at 70% are you seeing how wholesaling is not one- siiz fits-all in fact wholesaling to a flipper is just one option and it may not be the best option landlords or Buy and Hold investors are the next highest paying buyers they typically can pay more than flippers because they aren't looking to make a quick profit they're more concerned with cash flow than a quick profit now they they also aren't going to spend as much money fixing up the property because it's a rental so let's take the same deal with an arv of 400,000 that a flipper who follows a 70% formula would buy for 230,000 let's say a landlord would only spend 10,000 in repairs to make it rent ready and let's say he wants to be Allin for 80% of the A's value and since it's not getting fixed up as nice let's just say that it's worth 365,000 instead of 400,000 that means a landlord would pay $280 $2,000 for the same deal think about that the exit to a flipper is $230,000 the exit to a landlord is$ 282,000 why is the landlord willing to pay $52,000 more for the same deal because he has a different intended use of the property than the flipper his goal is cash flow not immediate profit a general formula that many Buy and Hold investors follow is called the 1% rule the 1% rule states that a rental properties income should be at least 1% of the total investment so in our previous example if rents are $2,800 per month a landlord would invest 280,000 for that property and if you wanted to make 20,000 wholesaling that deal to a 1% Ral Buy and Hold investor you would need to get the deal for 244,000 let's talk about another Buy and Hold situation that blows them all out of the water creative financing wholesaling creative financing deals to buy and hold investor is the hottest strategy right now due to interest rates being higher and more difficult lending requirements credit financing deals are very desirable to buy and hold investors let's take our same deal example if I were to structure favorable terms with a seller that had a low interest rate and a low down payment I could wholesale that deal for 100% of the value or even higher because a landlord cares more about the terms of the deal than the price wholesaling creative deals is one of the highest exit prices I've ever seen now in some of my wholesale markets we're wholesaling 100,000 plus per month in Creative deals I did a video that breaks down exactly how we do it and how to structure creative deals I'll put the link in the description below for you to watch later now the last buyer I want to talk about is the do-it-yourselfer these are people who are not really investors but still buy distress properties their intent is to live in the home and maybe someday never fix it up themselves these buyers will often pay the ad is value of the home with the goal of adding value with Sweat Equity so in our previous example a do-it-yourselfer would pay 350,000 knowing it's worth 400,000 fixed up now the best way to find these buyers is on the MLS and the wholesale strategy is doing what's called a Novation now inovation is where the seller agrees to let you publicly Market the property for sale to find an End buyer it's basically wholesaling to a retail buyer at the current Asis value of the property now with the Novation you need to factor in closing fees and commissions and your profit so the Novation buy formula is pretty simple take the Asis value subtract 8% to cover closing cost commissions and miscellaneous and then subtract your wholesale profit to get your Buy price now I like to shoot for a $40,000 wholesale fee to give me a little wiggle room so with our deal example you would take the Asis value of 350,000 * 92% minus 40,000 in wholesale fee which equals 282,000 let me give one more example of how not all buyers are the same and how some buyers pay more than others let's talk about hedge funds now during the recent real estate boom multi-million dollar and even billion doll hedge funds came on the scene and many of them were buying with cash at 100 to 110% of the A's value in our example they would pay the full 350,000 for the A's value or sometimes even more unfortunately that ship came in sale since the market correction many of them have gone away or adjusted down their buy criteria but the point is I want you to think about all of these different exit strategies we discussed for the same property a flipper would pay 230,000 a local buying hold investor or retail buyer would pay 282,000 and a creative Finance buyer would pay 350,000 again the best wholesalers understand there isn't just one type of buyer or one way to structure deals the pro wholesalers know how to leverage all the different exit strategies and they know how to structure wholesale deals that fit the right exit strategies to help you get better at analysis I got three tips for you tip number one is to network with other wholesalers in your Market especially the players doing 5 10 15 deals a month ask them what exit strategies are working the best for you right now what are your buyers paying for deals right now you better believe they know exactly what their buyers are paying pign tip number two is to directly research cash buyer activity in your Market to learn what they're doing where they buy and what they pay you can do this for free using prop wire if you don't know prop wire is a revolutionary new software for wholesalers and one of the features is cash buyer data you can look up where they bought when they bought and how much they paid and even how many properties they own and like I said prop wire is free to search and download as much data as you want just go to join propop wire.com to do your first search and I even did a video tutorial showing how I found 50 legit buyers for one of my wholesale deals that I was working on I'll put the link to that video in the description below for you tip number three is every time you talk to a cash buyer ask them their buy formula say the following hey Mr cash buyer to get better at bringing you deals what is your current buy criteria another way I like to figure it out is every time I wholesale a deal I reverse engineer the math using their numbers for example let's say that that I wholesale a deal for 220,000 to a flipper I'll ask him or her what arv and repair numbers did you use when you bought my deal if he says he used an arv of 320,000 and factored 20,000 in repairs then if I do the math backwards he bought my deal following the 75% buy formula that's valuable real-time feedback that will help me get better and knowing what formula to use when calculating my wholesale offer prices and then make the process of running the number super fast and easy be sure to get my free deal analyzer tool this has a built-in calculator so it does all of the math for you to get this for free just go to my deal analyzer decom to download it now now if you found this video helpful leave a comment and say Jerry you are a flipping genius and next I want you to watch a video where I break down how to calculate the repairs on any deal in under 60 seconds using my proven repair algorithm now that video is a game changer so watch it now and I'll see you on the next video