Wholesale House Flipping 65% Rule (The Great Myth)

This is my very first article. I’m about to catch up with the internet world. I have played professional golf for most of my life but have been a real estate investor and wholesaler for around 22 years.

I’ve signed over 200 houses in that time. I have passed most of these houses on to other investors/rehabbers and made a very quick and fairly easy profit. I’ve also kept many homes for rehab and retail purposes, and kept many of them as rentals to build long-term wealth.

I have used various exit strategies when buying houses. Owner financing, leasing options and rental properties. That’s the beauty of being a professional real estate wholesaler. It gives me many options for properties I bought at big discounts. If I keep the property for rent then I have a great property that has tremendous equity and certainly isn’t as badly affected by downturns in the real estate market.

I rarely deal with foreclosures. In most cases there is very little equity to work with. I’m not looking for a paltry amount of cash flow from a home. Rental management is too much work. Too many people and legal issues to deal with. Now if I have a house with 25 to 50 percent equity, I certainly don’t mind the hassle as much and I’m not influenced by the market. Also, I can flip a contract on a house and make a profit greater than 20 rental houses. I could flip five houses in a month. That’s a much better scenario than leaky faucets, broken water heaters, leaky roofs, etc.

I have spent over a year and a half working on my educational information available on the internet.

I live in Dallas, Texas and do powerful advertising for motivated sellers in our Dallas/Fort Worth area. I get calls every day from a lot of people who have nothing to do with the sale of their property. The calls are coming from people who have taken expensive wholesale courses from big gurus in the industry. People with some knowledge but no mentoring. People who spent a fortune learning my business. Most of these people are still in the fog. They have no idea which way to go. You seem to know the basic structure of wholesale, but just can’t sum it all up. No experience or training in using exit strategies They received plagiarized facts about the wholesale business and no support. No care. If they’re offered any kind of mentoring, it costs them a bunch more money. It seems they are dying piecemeal.

Everyone seems to have this mindset that a wholesale price for real estate is 65 percent of retail value (post-repair value), minus repairs and minus their stated assignment fee. Then they are supposed to find an investor/renovator who will buy their contract for 65 percent of the sale value minus those repairs and your contract fee.

Example: Home value $100,00.00 x 0.65% = $65,000.00 – the repairs – $25,000.00 – job fee – $5,000.00 What you are offering to the seller = $35,000.00

Much luck!

I agree that you should try to buy a home for as low a price as you can get, but many homeowners just aren’t going to sell their home that cheap. That’s where most callers end up. No contract for a house. No placement fee and no living expenses. The example above is a great scenario to follow if you can get the seller to agree. Many won’t. Here I see the lack of understanding and training given to them. These guru-educated students have no idea what to do at this point. No negotiating skills.

A lot of houses I’ve signed were houses that wholesalers bid on and didn’t get because they adhere to that 65 percent rule that they’re taught. A rule that doesn’t always work.

I prefer to give the seller more for their home and give the investor a lower percentage of the return. I have investors who don’t necessarily use the 65 percent rule when renovating a home.

In the example I used above, why would an investor always make a 35 percent profit on a deal? I’m not here to make investors rich. I just want to offer them a good profit margin for 60 to 90 days of rehab work. I found the house and the seller. Without this, the investor does nothing. I would certainly think that if an investor makes a 20 percent profit in a short period of time, that’s an excellent return on their investment. Can any of you tell me where I can get a 20 percent return on my investment during this period? You can not. Also, if they know what they are doing, they can get good tax benefits on the investment.

Find investors who are willing to be reasonable about their profit margins and you will sign more houses. I guarantee it.

People who are really trying to learn our business are not properly trained. They’re stuck like they’re being trained by the government; Follow the rules in the book, NO EXCEPTIONS. With this mindset, you will never achieve your goals.

You have to negotiate. You have to negotiate with buyers and sellers. Our business is negotiation, not lost in the fog.