How to Evaluate a Wholesale Deal: The Numbers That Matter

Why Deal Evaluation Is the Most Important Skill

Knowing how to evaluate a wholesale deal separates successful investors from those who lose money. The allure of a below-market price can be seductive, but price alone does not determine profitability. You need a systematic approach to analyzing every deal that crosses your desk -- a framework that accounts for acquisition cost, rehab, holding costs, selling costs, and realistic exit values.

At Impact House Deals, we see buyers at every experience level. The ones who build wealth consistently are the ones who run the numbers coldly and pass on deals that do not meet their criteria. Discipline in deal evaluation is the foundation of a profitable investment career.

The 70% Rule: Your Starting Filter

The 70% rule is the simplest and most widely used screening tool for wholesale deals. It states that your maximum allowable offer (MAO) should be 70% of the ARV minus estimated repair costs. The formula: MAO = (ARV x 0.70) - Repair Costs.

For example, a property with a $220,000 ARV needing $45,000 in repairs: MAO = ($220,000 x 0.70) - $45,000 = $154,000 - $45,000 = $109,000. If the wholesale price is at or below $109,000, the deal passes the first filter. If it is significantly above, move on unless other factors justify a tighter margin.

The 30% buffer in the 70% rule covers selling costs (typically 8-10% of sale price for agent commissions, closing costs, and transfer taxes), holding costs (mortgage or hard money interest, insurance, taxes, and utilities during rehab and sale), and your profit. In Baltimore County, where holding costs are moderate compared to higher-priced markets, some experienced investors stretch to a 75% rule -- but only on properties in high-demand areas with fast resale timelines.

Detailed Cost Breakdown for Baltimore County

Once a deal passes the 70% rule, run a detailed cost analysis. Here is what to account for in the Baltimore County market:

Acquisition costs: Purchase price plus assignment fee (already included in the wholesale price), title insurance ($1,500-$2,500), settlement fees ($800-$1,200), and recording fees ($200-$400). Transfer taxes in Maryland are approximately 1.5% of the purchase price split between buyer and seller, though in wholesale transactions the buyer often covers the full amount.

Rehab costs: Get a detailed scope of work and budget before committing. In Baltimore County, full cosmetic rehabs on rowhomes and Cape Cods run $35,000-$55,000. Major mechanical systems (HVAC, electrical panel, plumbing) add $5,000-$15,000 each. Structural work like foundation repairs or load-bearing wall removal can add $10,000-$25,000. Always include a 10-15% contingency.

Holding costs: Calculate monthly costs for the duration of your project. This includes hard money or mortgage interest ($800-$1,500 per month on a typical Baltimore County deal), property insurance ($100-$150 per month), property taxes ($150-$300 per month), and utilities ($150-$250 per month). A 5-month hold adds $6,000-$11,000 to your all-in cost.

Selling costs: If flipping, budget 8-10% of the sale price. This includes agent commissions (5-6%), buyer closing cost contributions (1-2%), transfer taxes, and miscellaneous closing fees. On a $220,000 sale, that is $17,600-$22,000.

Calculating Your True Profit

True profit equals sale price minus all costs: purchase price, rehab, holding costs, and selling costs. Using our example: Sale price $220,000 minus purchase $109,000 minus rehab $45,000 minus holding $8,000 minus selling costs $19,800 equals $38,200 net profit.

Express this as a return on investment: $38,200 profit divided by $162,000 total investment equals 23.6% ROI over approximately 5 months. Annualized, that is over 50% return on capital. These are the kinds of returns that wholesale deals in Baltimore County can deliver when the numbers are right.

Red Flags to Watch For

Inflated ARV is the most dangerous red flag. If a wholesaler's ARV seems high relative to your own comp research, trust your numbers, not theirs. Pull your own comps and be conservative.

Underestimated rehab costs are equally dangerous. Walk the property before committing whenever possible. Look for signs of water damage, foundation issues, mold, termites, and outdated electrical or plumbing that are not captured in the wholesaler's scope. If you cannot walk the property, budget higher contingencies.

Title issues can derail a deal. Look out for liens, judgments, code violation fines, and unclear ownership chains. A good title company will catch these, but it is better to ask upfront. Wholesalers should disclose known title issues before you go under contract.

Unrealistic timelines kill profitability. If a rehab will take 4 months but you budgeted for 2, your holding costs double. Be honest about your contractor's availability and the scope of work required.

Build Your Evaluation Framework

Create a deal analysis spreadsheet or use an investment calculator that incorporates all the costs outlined above. Run every wholesale deal through it before making an offer. Over time, you will develop an intuitive sense for which deals work and which do not -- but always verify with the numbers. Impact House Deals provides transparent financials with every deal alert, making it easy to run your own analysis. Join our buyer list at impacthousedeals.com and start evaluating deals with confidence.