Wholesaling
How to Analyze a Wholesale Deal: The Complete Guide
A wholesaler sells a spread that survives the end buyer's own analysis. Five steps produce that spread, and an offer you can defend to both sides.
Wholesaling is contracting a property at one price and assigning the contract to an investor at a higher one. The business is analysis, because the spread has to survive the end buyer's numbers as well as yours. This guide walks the five steps in order, then works a complete deal from comps to the offer to the seller.
Why the analysis is the business
The wholesaler is paid for finding a spread and proving it. A seller accepts an offer that is explained. An end buyer takes an assignment that survives their own underwriting. Both outcomes depend on the same five numbers, and a mistake in any of them costs the fee, the deposit, or the buyer list.
The order matters. Start with the fee and you will bend the other numbers to justify it. Start with the finished house and work backwards, and the fee is whatever the deal can actually carry.
| Step | Question it answers | Output |
|---|---|---|
| 1. ARV | What will the finished house sell for? | The exit price everything is measured against |
| 2. Investor prices | What are flippers nearby actually paying? | A ceiling and a sanity check on the offer |
| 3. Repairs | What does it cost to get from as-is to ARV? | The budget the buyer will underwrite |
| 4. Exit strategy | Is the buyer flipping or holding? | Which formula sets the buyer's price |
| 5. Fee and offer | How much can the deal carry, and what does the seller get? | Assignment fee and offer to seller |
Step 1: Estimate the after repair value
ARV is what the house sells for after the end buyer's renovation, taken from three to five recent sales of renovated, similar homes within about a mile. Not the list price, not the tax value, and not the best sale on the street.
Convert each comp to price per square foot, weight the closest and most recent, adjust for features the subject will or will not have, and multiply by the subject's living area. The full method is in our guide to calculating ARV.
Step 2: Find what investors are paying
Retail comps set the exit. Investor purchases set the entry. A house that an investor bought and resold within twelve months at a 30% or greater gain is a flip, and its purchase price is what a buyer in that neighborhood was willing to pay for a project.
Three or more of those purchases, expressed per square foot, give you the local discount and a ceiling for the as-is price. If your solved offer sits far above what flippers paid for similar houses, revisit the ARV or the repair estimate before you present it.
Example uses public listing data for illustration. See disclaimer.
How to find these purchases, by hand or automatically, is covered in what investors are paying for properties.
Step 3: Estimate repairs the buyer will believe
The repair number needs a walkthrough and a scope, because the end buyer will inspect and renegotiate anything that does not match. Price it the way a flipper would, by system and by finish level, and add a contingency.
| Scope | Typical range | Per square foot |
|---|---|---|
| Cosmetic: paint, flooring, fixtures, landscaping | $15,000 to $30,000 | $10 to $20 |
| Moderate: kitchen, baths, one major system | $30,000 to $60,000 | $20 to $40 |
| Heavy: roof, HVAC, electrical, plumbing plus the above | $60,000 to $100,000 | $40 to $65 |
Regional labor and material costs move these ranges by 20% or more. Contractor bids beat any table.
Add a 10% to 15% contingency to your line items. Buyers will, and a repair estimate without one reads as inexperience.
Step 4: Decide which buyer you are pricing for
The end buyer's exit strategy chooses the formula. A flipper's price is the most they can pay and still clear a target return after selling at ARV. A landlord's price is the most they can pay and still earn a target cash-on-cash return on the rent. ARV drives the first; rent drives the second.
Flip exit: Investor price = ARV ÷ (1 + target ROI) − Repairs − Buy closing − Holding − Selling costs
For a cash buyer. Financing costs come out of the same total when the buyer uses a loan.
In a rental exit, the rent estimate, the buyer's down payment and loan terms, and every operating expense produce the cash flow, and the price is solved so that cash flow divided by cash invested equals the target.
In a strong rental market that price is often higher than the flipper's, which means a better offer to the seller and a larger fee.
Example uses public listing data for illustration. See disclaimer.
Step 5: Set the fee and the offer to the seller
The fee is subtracted from the end buyer's price. Grade it against ARV so it is defensible to the buyer: around 5% of ARV is fair, 7% is good, 10% or more is excellent. The seller sees only the offer, which is the investor price minus your fee.
Offer to seller = Investor price − Assignment fee
Both numbers have to work: the buyer's return at the investor price, and the seller's willingness at the offer.
| Tier | Fee as share of ARV | On a $240,000 ARV |
|---|---|---|
| Excellent | 10% or more | $24,000 or more |
| Good | 7% to 10% | $16,800 to $24,000 |
| Fair | 5% to 7% | $12,000 to $16,800 |
| Marginal | 3% to 5% | $7,200 to $12,000 |
The tiers mirror the Assignment Fee Quality gauge in Smart Rental Investor's wholesale analysis.
Putting it together: a complete worked deal
A 1,500 square foot house, dated but structurally sound. Renovated comps put the ARV at $225,000. Three nearby flips were bought at an average of $98 per square foot. The end buyer is a cash flipper who requires a 20% return on total cost and expects six months to resale.
ARV: $225,000
Three renovated sales within 0.6 miles, averaging $150 per square foot, adjusted for a garage the subject lacks.Investor prices: about $98 per square foot
A $147,000 ceiling for the as-is house before repairs are considered, so any solved price near $120,000 to $150,000 is consistent with the neighborhood.Repairs: $40,000
Kitchen, both baths, flooring and paint, with a 12% contingency already included.Exit: flip, 20% target return, six months
Buy-side closing about $3,000, holding costs $750 a month for six months, selling costs 8% of ARV.
Solving the end buyer's price and the offer to the seller
- Maximum total cost$225,000 ÷ 1.20
- $187,500
- Repairs with contingency
- −$40,000
- Buy-side closing
- −$3,000
- Holding costs$750 × 6 months
- −$4,500
- Selling costs8% of ARV
- −$18,000
- End buyer's investor price
- $122,000
- Assignment fee7.1% of ARV, a Good fee
- −$16,000
- Offer to seller
- $106,000
If the seller will not go below $115,000, the deal still has room: a $7,000 fee at $115,000 keeps the buyer at their target. That is the decision the analysis exists to make, in the seller's living room, with numbers rather than hope.
Example uses public listing data for illustration. See disclaimer.
Frequently asked questions
How do you analyze a wholesale deal?
Work backwards from the end buyer. Estimate the after repair value from renovated comparable sales, estimate repairs, decide whether the buyer is a flipper or a landlord, solve the most that buyer can pay and still hit their target return, then subtract your assignment fee. What remains is the offer to the seller.
What is a good assignment fee?
Measured against the after repair value, 5% is a fair fee, 7% is good and 10% or more is excellent on most deals. In dollars that is $10,000 to $20,000 on a $200,000 ARV. A fee that pushes the end buyer below their target return will not assign, however large it looks.
Do I need to know the buyer's exit strategy before I make an offer?
Yes, because it changes the price. A flipper pays what leaves them a target profit after the resale. A landlord pays what leaves them a target cash-on-cash return on the rent. In a strong rental market the landlord's number is often higher, which means a higher offer to the seller and a safer fee.
What if the seller wants more than my maximum offer?
Show the arithmetic. A seller who sees the ARV, the repair estimate and the buyer's required return understands that the number is the market's, not yours. If the gap remains, walk away; a contract you cannot assign costs you deposit money and reputation with buyers.
How accurate does my repair estimate need to be?
Within about 10% for the end buyer to trust it, which means a walkthrough and a scope, not a guess from photos. Overstate repairs and your offer loses to a competitor; understate them and your buyer renegotiates or backs out after inspection.
Keep reading
Wholesale Real Estate Calculator: What to Offer Sellers
The formula behind the offer, and how to run it on a live seller call.
Read articleHow to Calculate ARV (After Repair Value)
Step one in depth: comps, adjustments and the mistakes to avoid.
Read articleWhat Are Investors Paying for Properties in Your Area?
Step two in depth: finding the flips and reading their purchase prices.
Read articleFix and Flip Profit Margins: How to Calculate Your Spread
What your end buyer is calculating on the other side of the table.
Read articleRun all five steps on one screen
Smart Rental Investor's wholesale analysis estimates ARV from comps, shows nearby investor purchases, takes your repair budget and fee, solves the end buyer's price for a flip or a rental exit, and prints the offer to the seller with the breakdown behind it.
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