In this solo instructional video, real‑estate investor Joe Homs of H&M Realty Group outlines the specific purchasing criteria he uses for wholesale deals in Orange County, California. He explains that a property should be bought at no more than 80 % of its after‑repair value (ARV) and that a full rehab typically costs about 10 % of the ARV (or roughly $45 per square foot, with condos averaging $35,000). He also targets a 10 % profit margin on the ARV. Closing costs are estimated at 4.5 % of the purchase price, broken down into 2.5 % buyer‑agent commission, 1 % escrow/title, and 1 % listing fee. Homs notes that a complete rehab usually takes 30 days or less, and the entire transaction should close within 2–3 months. He emphasizes that these rules are a quick‑screening tool to filter out unsuitable wholesale offers before conducting a detailed property inspection.
Chapters
Hello, my name is Joe Homs. I work with H&M Realty Group. We're here talking about part 3 of Wholesaling 101. In particular today, we'll be talking about my purchasing rules. And I want you to know that these are my purchasing rules that I use here in Orange County, California. They're not specific to any other areas. I know that you'll look across the country and obviously the percentage rate is a lot lower. It's a very competitive environment here in Orange County, and so that's why I use these rules. And so let's go right into number 1 here. We're talking about 80% of the after-repair value. So for example, if I'm looking at a property and the after-repair value is $500,000, I'm going to use 80% of that to figure out that this is going to be a good buy or not. This is a great tool for me because again, multiple emails a day from different wholesalers, and I use these rules to kind of weed out the wholesalers that send me properties where the after-repair value, in their opinion, is way up here and it really isn't, and the rehab costs are low, which is what we're going to talk about next, and it really isn't. It's a lot higher. And when I'm talking about a rehab, which is what we're going to talk about number 2, I'm talking about pretty much of a complete rehab, which we'll be removing kitchens, cabinets, bathrooms, fixtures, maybe doing a little bit of redesign, not much carpeting, painting, flooring, anything, windows, anything to do with the inside of the house is what I'm talking about when we're talking about these numbers. So a quick down-and-dirty number to use For rehabs, I use 10% of the after-repair value. So again, in my example of $500,000, I'm probably going to spend around $50,000 or $60,000 to rehab that place. I also like to make about 10% of the ARV for profit, so you can throw that into the mix as well. But this 80% of the ARV will pretty much get you to where you need to be. Continuing about talking about rehab, you can also use $45 a square foot if you want to use an actual number. Condos, I can rehab a condo, and again, this is, this is my cost through my contractor and my relationships that I've had over 40 years with a lot of these vendors. So I can do a complete rehab of a condo for around $35,000 here in Orange County. Condos are very easy to do. Rehab usually takes about 30 days or less back on the market after you purchase it. You should hopefully be done with your transaction in 2 months, no more than 3, and then moving forward to your next project. Closing costs, and a lot of people forget this, please don't forget that. The closing costs that I use here are 4.5%, and I break that down into 2.5% to the buyer's agent I am a full-time real estate agent as well, so I don't charge myself at the end of the day. I do work with investors, I do work with wholesalers, I do work with other flippers, and when they're done flipping their projects, they bring them back to me. So we're talking about 2.5% to the buyer's agent, 1% escrow and title, kind of give you a little bit of a cushion and a pad there, and then I will list the property back for you at 1%. So total cost for selling a property at the end of the day, 4.5%. This is the rules that I use for evaluating deals. They're important rules. At the end of the day, you're going to go out and look at the property and you're going to determine whether you even need 10% to rehab this property or not, whether you're going to do a light rehab, a medium rehab, or do you need to do the full rehab. These numbers here just get me to the point where, okay, this deal looks interesting. Then I take my next step, and then I'll actually call the wholesaler or the agent and make an appointment to look at the property and then properly evaluate what needs to be done at the property. I hope this is helpful. Again, this is part number 3. We still have 2 more parts left, 4 and 5. We'll go into those next. Thank you for joining me. I appreciate it. Thank you, Joe.
