How I Calculate Wholesale Offers (While On The Phone) | Flipping Mastery

Welcome to the Wholesale Hotline Podcast Weekend Edition (Flipping Mastery Edition), where Jerry teaches how to master the art of house flipping, wholesaling, and new construction development. Show notes -- in this episode we'll cover: Straightforward, step-by-step training on making six and seven figures from real estate deals. Insider tactics for finding motivated sellers, analyzing deals, and raising private money. Learn how to flip houses virtually from anywhere—even with zero experience. Whether you're a beginner or scaling up, Jerry gives you the blueprint to build real wealth through real estate.

• 0:02Speaker 00

  You are listening to another TTP Breakout with Brent Daniels on the Wholesale Hotline Podcast.

• 0:14Speaker 01

  If you ever watch me call sellers live on YouTube, you'll see that I instantly know what price I need to be at when making offers. And these are properties that I'm just looking at for the first time. Now, if you plan on wholesaling virtually where you offer, negotiate, and contract over the phone instead of in person at the property, then learning how to quickly and efficiently run the numbers is a skill you must learn and master. I'm going to show you exactly how I do it, coming up.

• 0:42Speaker 01

  When it comes to wholesaling and flipping, I have two different business models. One is a backyard model where we hyper-focus on a specific market and we close deals on appointment at the properties. Now, in my backyard markets, the goal is to become what I call a local market expert and dominate that market and do seven figures plus annually. Now, the other model I do is a nationwide virtual business. This is where I buy nationwide leads, call sellers, offer, negotiate, and close over the phone without ever seeing the properties in person. Then I will wholesale, or I'll buy and flip these deals, again remotely, without ever seeing those properties in person. Both models have their pros and cons, and both work if you know what you're doing.

• 1:26Speaker 01

  If you want to see what my nationwide virtual business looks like, watch the weekly show I do on YouTube with my good friend and pro wholesaler, RJ Bates. Every week, him and I go live for two or three hours, taking turns calling sellers. If you watch that show, you'll see some calls we get on motivated sellers, angry or rude sellers, and sometimes we talk to motivated sellers. You get to watch live and see how we navigate everything and anything, so it's a great learning experience to see that process in action. Now, when RJ and I go live, you get to see the conversations, but what you don't get to see is what's happening behind the scenes, how we research the property, how we comp, what relevant questions we're uncovering,

• 2:08Speaker 01

  how we're running the numbers, or even how we fill out and send contracts. Now, years ago, I actually used to screen-record my computer so you could see exactly what I was doing, but I had to stop doing that for two reasons. One, people watching the live would try and steal my deals because they could see the information. And more importantly, if you reveal addresses or personal information, YouTube may take down the video because it violates their privacy rules. So what I'd like to do on this is explain what I do behind the scenes when I'm on the phone with sellers, comping properties, making offers, and running the numbers. My hope is this will give you more clarity on how you can improve doing the process in your business.

• 2:49Speaker 01

  Okay, so first of all, you have to understand the mindset about how I approach the process. I never comp or run numbers before making the call. Pre-analyzing deals is a big time waste because you may not even get a hold of the seller, or you may find out that they're not even motivated at all. So step one is to only begin any type of analysis once the seller answers the call and you confirm that they do in fact want to sell. Assuming you get that far, step two is to get the seller to name the price they want. Simply ask, "What price are you hoping to get for this property?" If they won't answer, which is common, rephrase the question.

• 3:30Speaker 01

  "If you could sell this property as-is for all cash and close on your timeframe with no cost to you at all, what would you need to see for an offer like that?" Now, once they give a number, step three is you need to put context to that number. The fastest way to do that is to look up the address on Zillow, Redfin, or Realtor.com. Now, each of those mega-sites give an estimated value of the property. Now, preferably look at all three and get an average. Now, if you have my offer calculator tool, while on the phone with the seller, enter these three values into the calculator. So in this example, the Zillow value was $249,000, the Realtor.com value was $275,000,

• 4:13Speaker 01

  and the Redfin value was $265,000, making the average of all three $263,000. Now, this takes very little effort or energy. By the way, I'll give you my offer calculator tool for free. Keep watching, and I'll tell you how to download it for free. So what do these values represent? Let me explain. Zillow, Redfin, and Realtor.com invest millions in their algorithms to determine the values of properties. They are compiling hundreds and sometimes thousands of data points to get these estimated values, including homes in poor condition that sold below market value, homes in fair condition that sold at market value, and fixed-up homes that sold above or at the top of market value.

• 4:57Speaker 01

  And since the majority of all sold properties in general are not in poor condition or fully renovated, the value mostly reflects homes that are in fair condition, or what I call the fair market value, or what I often refer to as the as-is value. Now, why is this so important? Because if I'm on the phone talking to a homeowner who is living in the property and they say the property is in fair condition, I can assume with some reliability that the average value of Zillow, Redfin, and Realtor.com is probably a fairly accurate as-is value of the property. So going back to my calculator, the example I used, the Zillow value was $249,000,

• 5:38Speaker 01

  the Realtor.com value was $275,000, and the Redfin value was $265,000, making the average of all three $263,000. By using this method in less than 60 seconds while on the phone with little effort, I now have a reference point. Is it perfect? No, because I don't know all of the nuances to each particular property, but it's a very reliable method that allows me to quickly get my head around the property's value and what I'm dealing with. So using my example with an average as-is value of $263,000, let's say the seller says the price I'd like to get is $250,000, which is the Zillow value.

• 6:17Speaker 02

  Still paying for property data? PropWire gives you unlimited property data, comps, and more, for free. Download the PropWire app on the App Store or Google Play Store today.

• 6:28Speaker 01

  I now know the seller's starting price is retail. It doesn't mean he won't take less, but now I have a reference point, and now I know what direction to take the conversation. Let's say with an average as-is value of $263,000, the seller says he'd like to get $150,000. Well, now I know his asking price is significantly below the as-is value, and I'm either dealing with an extremely motivated seller, or there's something else going on with the property. My point is, I have a reference point for how to take the conversation. You see, the seller's asking price only has meaning if I have a solid idea on the property's value. You have to grasp this concept. If you don't, nothing else I share will make any sense.

• 7:13Speaker 01

  Okay, once I have the as-is value, step four is to calculate the wholesale exit price. The exit price, or dispo price, is a discounted percentage off of the as-is value that a cash buyer would most likely pay to buy the property. The question you have to ask yourself is, "What would a cash buyer pay for this deal that leaves him enough room to make money?" Now, how do we determine the discount percentage for the exit price? The answer is, it depends. It depends on the price range of the deal. Now, after doing hundreds of deals a year for 20-plus years, I created a simple formula that automatically determines the exit price is based on five different price ranges. Now, if you reference my offer calculator, notice this chart here.

• 7:58Speaker 01

  If the as-is value is under $100,000, the exit price needs to be 35% of the as-is value. So let's say the as-is value is $75,000. The exit price at 35% would be $26,000. If the price range is $101,000 to $200,000, the exit is 50%. $201,000 to $300,000, the exit is 60%. $301,000 to $400,000 is 65%. And $401,000 to $500,000 is 70%. Now, the good news is my offer calculator automatically calculates the exit price for you. Now, in our previous example where the as-is value is $263,000, the exit is 60% or $157,000.

• 8:42Speaker 01

  Now, after calculating the exit price, step five is to calculate your wholesale fee. Now, this can be whatever you want, but I also follow a percentage of the price range. The higher the price point, the bigger my desired profit. So as the price goes up, so does my expected profit. And you can see on my chart here, if the as-is value is under $100,000, my wholesale profit is $10,000. If the price range is $101,000 to $200,000, the wholesale profit is $20,000. $201,000 to $300,000, the profit is $25,000. $301,000 to $400,000, the profit is $30,000. And from $401,000 to $500,000, the profit is $40,000.

• 9:23Speaker 01

  Now, in our example where the as-is value is $263,000, the wholesale profit is $25,000. So now that we have our exit price and our wholesale fee, step six is to calculate the wholesale buy price, or what we often refer to as the maximum allowable offer, or MAO. Now, this calculation is real simple. It's just the exit price minus the wholesale profit. This is where we want to land on price with the seller at the end of negotiations. And finally, step seven is the anchor price, or the starting price. Now, I have three rules when it comes to setting the anchor. One, it needs to be a ballpark or a range, not a concrete number. So you might say, "In the perfect world, I'd be under $100,000."

• 10:05Speaker 01

  Or you might say, "If you got offers from other investors, I bet they would be in the high $200,000s." Rule number two, the offer needs to be ridiculously low, which brings me to rule number three. It needs to solicit a no. After giving the anchor, the seller should say, "There's no way I can go that low." When that happens, you respond with, "Well, that's my offer in the perfect world, but how close to that can you get?" And continue negotiating until you find the seller's best price, somewhere between your anchor and your MAO. Now, what I want you to notice is, I didn't do any comping, and I didn't estimate repairs. This method allows you to quickly get your number on the fly in under 60 seconds.

• 10:49Speaker 01

  And I'll give you my offer calculator tool for free. To get the download, just go to freeoffercalculator.com. All I ask in return is you leave a comment and say, "Thank you, Jerry, for the free calculator. You are a flipping genius." Now, you might be wondering, "When will I actually look at comps and estimate repairs?" I might look at comps if I'm close and I want to verify the numbers, or if the seller is really analytical, I might look at comps so that we have a more detailed conversation. There are exceptions, but what I love about this tool is I don't have to comp or estimate repairs, and that puts me in the driver's seat.

• 11:28Speaker 00

  Thank you for listening to this episode of Wholesale Hotline. If you're interested in joining the Rhino Tribe, the most proactive community in real estate investing, go to wholesalinginc.com, check out what it is all about. If it feels good in your gut, sign up for a call, and I look forward to working with you personally. I will see you there. And as always, I encourage you to go out there and talk to people. See ya. Love you.