How to Evaluate a Wholesale Deal

Wholesale contracts can be great acquisitions, but not every wholesale deal is a good deal.

Wholesale deals come to you pre-negotiated with a seller, but that doesn't mean they're automatically profitable. Evaluating wholesale opportunities requires the same rigor as any other acquisition.

Verify the ARV independently: Never rely on the wholesaler's ARV estimate. Run your own comp analysis using recent sales data. Wholesalers are incentivized to present optimistic valuations to justify their assignment fee.

Inspect the property: Always walk the property before committing. Wholesaler-provided photos may not show the full picture. Bring your contractor for a repair estimate.

Understand the fee structure: The wholesale assignment fee is the spread between the contract price and your purchase price. Typical fees range from $5,000-25,000. A deal can be good for the wholesaler but unprofitable for you if the fee is too high.

Verify the contract: Have your attorney review the purchase agreement. Ensure the wholesaler has equitable interest in the property and the contract allows assignment.

Check for daisy chains: Some deals pass through multiple wholesalers, each adding their fee. By the time the deal reaches you, the accumulated fees may have consumed the profit margin.

Build relationships with reliable wholesalers who consistently bring accurate deals. Over time, these become your most efficient lead source.