How to Analyze a Wholesale Deal
Deal analysis is where wholesaling separates amateurs from professionals. Accurate numbers protect you, your buyers, and your reputation. Getting this wrong is the most expensive mistake in wholesaling.
After-Repair Value (ARV)
ARV is the estimated market value of the property after all repairs are complete. It is the foundation of every other calculation in the deal. Determining ARV requires analyzing comparable sales — properties of similar size, age, condition, and location that have sold in the past 90 days within roughly a half-mile radius.
Wholesalers access comps through the MLS (via agent relationships), through public record aggregators like Zillow or Redfin (with appropriate skepticism about their automated estimates), or through county assessor data. The more comps you analyze in a specific market, the more accurate your ARV estimates become. There is no substitute for local market knowledge developed over time.
The Maximum Allowable Offer (MAO) Formula
The MAO is the most you can offer a seller and still leave room for your assignment fee and your buyer's profit. The standard formula:
MAO = (ARV × 70%) − Repair Costs − Assignment Fee
The 70% rule is derived from the fix-and-flip investor's underwriting — most flippers won't pay more than 70% of ARV minus repairs, because they need room for holding costs, closing costs, financing costs, and profit. As the wholesaler, you back your assignment fee out of that number to arrive at your maximum offer to the seller.
Example Calculation
| Variable | Amount |
|---|---|
| ARV (based on comps) | $200,000 |
| ARV × 70% | $140,000 |
| Estimated Repairs | −$35,000 |
| Your Assignment Fee | −$10,000 |
| Maximum Offer to Seller | $95,000 |
Estimating Repair Costs
Repair estimation is a skill built through experience and contractor relationships. As a beginning wholesaler, walk properties with an experienced investor or contractor before submitting offers. Common cost benchmarks vary significantly by market, but rough national averages for frequently encountered items:
- Roof replacement: $8,000–$15,000 for an average house
- HVAC system: $4,000–$8,000
- Full kitchen remodel: $15,000–$30,000
- Full bathroom remodel: $8,000–$15,000
- New flooring throughout: $8,000–$15,000
- Full interior paint: $3,000–$6,000
- Foundation issues: $5,000–$30,000+ depending on severity
When in doubt, pad your repair estimate. Presenting a buyer with a deal where actual repairs exceed your estimate damages your credibility and your buyer relationship. Conservative repair estimates protect everyone.
Never guess on foundation, roof, or electrical. These are the three categories that most frequently blow up deals when investors discover actual costs post-contract. Build contractor relationships you can call for quick walkthroughs before you make an offer.