A few misconceptions of new wholesalers in the Boston area

  Good morning Boston area real estate investors!

I get emails all the time with deals from wholesalers who are looking to find a buyer for a property they are looking at.  The last several have included a report that they put together using Bigger Pockets analysis tool.  The tool in and of itself is pretty cool.  But, the old addage that I learned in computer operations school many years ago, GIGO, holds true.  GIGO stands for Garbage In Garbage Out.  In this case if the information that you are putting into the analysis tool is garbage, the analysis you get back will be garbage. 

For example, you need an accurate ARV.  When I see the reports come through and I ask, “Where did you get the ARV?  Do you have supporting comps?”, and the answer is, “I looked on Zillow.”, you really can’t be sure to that the number is accurate.  If you are not an agent and you can’t pull real comparables from MLS, then you need to team up with a local agent who can run comps for you.  It just so happens, that one of Boston AREIA’s newest ambassadors will run the comps for you.  Terri Naroian has been a member of Boston AREIA since 2014 and she has offered to run comparables for you.  Terri is licensed in both NH and MA and is investor savvy.  There are alot of investor friendly agents out there, who know nothing about investing.  Investor savvy means either they are investors too or they know how to run the numbers the way an investor does.  Terri happens to be an investor as well as an agent.  So, she knows how to run the numbers and she will provide you with comps that you can add to your wholesale packet.  Thanks Terri!  It’s best to email her at TerriNaroian@gmail.com and let her know you got her information from Boston AREIA. 

Another example is not adding financing numbers to the worksheet.  New wholesalers seem to forget that there are still financing fees for the rehabber because they are cash buyers.  Well, most rehabbers don’t fund their own deals.  Typically, they are borrowing money from private or hard money lenders.  That cost money.  Typically 2-5 points up front and depending on the lender 12-15% interest.  Good rule or thumb, if the rehabber is going to incur the expense doing the rehab, then that expense has to be included into your wholesale worksheet. 

Another example is not adding the Broker’s commissions because it is an off market cash sale.  Well, after the property is rehabbed, it will be sold by traditional means, meaning, listed on the MLS where broker’s fees are paid.  And, yes, some rehabbers are agents as well that list their own properties.  But, smart rehabbers will list the property with another agent.  For a few reasons, first, they are in business to rehab and resell properties and that’s where they want their focus.  They don’t want to be concerned all the time with running open houses to sell properties, they want to focus on the next rehab.  Second, if they are willing to give a listing to an agent that works in the area they like, that agent is going to refer approperiate rehab properties to them in the future.  So, please don’t forget the broker’s commissions on the resale.  Again, if the rehabber will incur the expense it has to be included. 

My last example is the rehab numbers.  You have to support the rehab number.  We are digging into the numbers with Chris Coute on Thursday night at our monthly meeting.  However, don’t just put a blanket number as the rehab.  Break it down.  Does it need a new kitchen, bathroom, roof, septic, etc.  What needs to be done?  The more you can break the numbers down, the quicker you will be able to sell your deal. 

Make it a great week.  See you on Thursday!

Bernadette Trafton, Chief Connector Boston AREIA

 

Comments

  1. Matt McLoughlin says

    Nice article Bernadette!

    I couldnt agree mmore about Zillow’s numbers being inaccurate. Zillow can get investors into a lot of trouble if they depend on their values. Direct comparatives from MLS are much more accurate and give you a lot more information about the past and current value.

  2. Basil Williams says

    I am new to real estate investing. How many investor friendly brokers do you recommend an investor to utilize? Do you have any recommendations for good investors?

  3. says

    Great comment! Especially in reference to the ARV. I’ve worked in the field for a long time and have definitely experienced the difficulties with appraising real estate. I guess that’s why Appraisers get so much training first! This is great info for both new and experienced investors. Thanks!

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