When Ryan started wholesaling real estate, he was doing a lot of $3k and $4k deals.
His cost for acquiring those deals hovered between $1k and $2k… so he was barely breaking even.
Watching other wholesalers profit $10k, $20k, even $50k from a single deal, Ryan committed to doing things differently — learning from those with larger assignment fees and applying those lessons to his own business.
Now he regularly does wholesale deals that profit $16,000 or more.
You can watch the video or read the article below to learn more about how he does it!
Use The 75% Rule
The 75% rule is the go-to formula that Ryan uses when determining the profitability of a deal as a wholesaler.
The 75% rule states that investors should pay no more than 75% of the property’s ARV minus the cost of repairs. As a wholesaler, you also need to subtract out your assignment fee. Here’s how that formula works…
(ARV x .75) – Repair Costs – Assignment Fee = Max You Should Pay
Imagine that you found a property with an ARV of $250,000 and you expect repair costs to be about $20,000. Also, you want to make $10,000. Here’s how the math would work out…
($250,000 x .75) – $20,000 – $10,000 = $157,500
(For the cost of repairs, Ryan doesn’t just look at what needs to be fixed right now, but within the next 1-3 years… because this is what your buyers are going to care about)
This means that you should pay a max of $157,500 — that’s your max allowable offer (see the next section). This ensures that you and your buyer will make good money on the property.
What’s Your Max Allowable Offer?
One of the biggest game-changers for Ryan’s business is that he implemented a max allowable offer. After you’ve calculated the ARV of the home as well as your ideal offer using the 75% rule, set your MAO as a tangible number.
Then, when you negotiate with the seller, you’ll know the most amount of money that you’re willing to offer — this removes any guesswork from the equation and gives you permission to say, “No. I’m sorry. Our business just can’t afford to go any lower than XX.”
This is a tactic that salespeople use all the time… and it’s very effective.
When you have a clearcut offer that you can’t exceed, then it’s just business… and the seller can choose to accept or reject your offer.
Don’t sit down at the negotiation table without knowing your MAO… and make sure you have the willpower to stick to that number.
Learn To Negotiate
It’s a little funny. But the first time that Ryan reached out to his friend who’d been doing high-profit wholesale deals and asked, “How are you doing it?” Ryan’s friend responded and said…
“You know why you’re not making more money on your deals, Ryan? It’s because you’re a bitch.”
What he meant was that Ryan didn’t have the confidence to negotiate high-profit deals with sellers… and until he garnered that gusto, he’d continue to make less money than he desired.
That’s why knowing how to negotiate is so important.
Without the confidence (and math) to say, “This is what my business can offer.” you’re going to make very little money on your deals.
Using the 75% rule and having a max allowable offer will help you negotiate more effectively with sellers. You’ll know what you can realistically afford and what you stand to make.
And then, you’ll increase how much money you’re making on each deal and how profitable your business is overall!