Wholesale due diligence is the review of a property's contract, condition, valuation, assignment terms, and end-buyer economics.
Is the assignment fee the buyer's profit?
The assignment fee is compensation to the wholesaler, not the end buyer's projected profit. Include that fee in the buyer's acquisition costs and verify contract assignability with qualified local counsel.
Why Most Wholesale Deals Die at the Buyer's Underwriting Table
The wholesale model depends on one thing: your buyer's numbers holding up when they run their own analysis. You can lock up a contract, negotiate a great price, and still lose the assignment fee if your end buyer's underwriting kills the deal.
Most wholesalers lose assignments not because they overpaid — but because they estimated ARV wrong. This guide covers the five-step evaluation process to run before you lock up any contract.
Step 1: ARV First — Everything Else Is Downstream of This Number
Maximum Allowable Offer (MAO) = ARV × (1 − Profit Margin) − Rehab Budget − Holding Costs
Every number in that formula is knowable. ARV is the one that kills deals.
Wholesalers who rush ARV estimates get burned in two ways:
- They lock up at a price that doesn't leave their buyer enough margin
- They can't close because no buyer will take it at their asking assignment price
A credible ARV estimate requires:
- Comparable sales within 0.5 miles in the last 90 days — not 6 months, not 1 mile
- Similar bed/bath/sqft — within 10% on square footage, same bedroom count
- Similar condition post-renovation — if your comp was a full gut rehab, use it; if it was a cosmetic flip, flag the difference
- Market velocity — how long comps sat before closing tells you if the market is absorbing supply or building a backlog
When comps are thin, widen the search but flag the uncertainty. An ARV with two weak comps deserves a wider confidence interval — and a more conservative MAO.
Step 2: Rehab Budget in 15 Minutes, Not 15 Days
You don't need a contractor on site to run a first-pass rehab estimate. You need a checklist and an honest look at the property:
- Roof — age, visible damage, remaining useful life
- HVAC — age and condition; full replacement runs $4,000–$8,000 per unit depending on market
- Electrical — panel age, visible work needed, any 60-amp panels that need upgrading
- Plumbing — age of pipes, water heater condition, visible leaks or deferred maintenance
- Cosmetic — floors, paint, kitchen, bathrooms; scope and finish level based on your end buyer's market
Build a budget estimate at three levels: light cosmetic (under $15k), moderate ($15k–$40k), and heavy or full gut ($40k+). Know which category you're in before you calculate MAO.
Undershooting rehab by $20,000 on a wholesale deal means your buyer's margin evaporates after they close. That means no repeat business and no referrals — two things the wholesale business runs on.
Step 3: Calculate MAO — and Make Sure It Leaves Your Buyer's Spread
The standard wholesale MAO formula:
MAO = (ARV × 0.70) − Rehab Budget
The 70% rule is a rule of thumb. End buyers — especially institutional buyers and experienced flippers — often need tighter margins depending on the market and project size. In competitive markets where flippers run on thin spreads, 70% may be too loose; in slower markets, buyers may want 65%.
Know your buyer pool and what spread they need. If your typical end buyer needs $30,000 of profit margin on a $250,000 ARV flip, build that into the MAO calculation explicitly rather than relying on a generic 70% rule.
Your assignment fee comes out of that buyer's spread. So the real formula is:
Effective MAO = ARV − Rehab − Holding Costs − Buyer Profit Target − Your Assignment Fee
If the math doesn't work for your assignment fee at a price the seller will accept, walk away. A deal with no assignment spread is not a deal.
Step 4: Score the Deal From Your Buyer's Perspective
Before you lock up the contract, run the numbers the way your buyer will:
- Entry equity — what percentage of ARV is the buyer getting at your assignment price? Below 70% is often too thin for a flip buyer
- Flip margin — after rehab, holding costs, and selling costs (typically 7–8%), what is the projected profit? Under $25,000 is usually a pass for experienced buyers
- Days to flip — faster flip markets forgive tighter margins; slow markets need more cushion because holding costs compound
A deal that scores well from your buyer's perspective means a faster assignment close, fewer price objections, and repeat buyers who trust your numbers.
Step 5: Move Fast on Winners, Pass Fast on Losers
The biggest mistake in wholesale underwriting is spending three hours analyzing a deal that fails the first two steps. Build a triage workflow:
- 60-second screen — does the price-to-ARV ratio leave room for MAO plus your assignment fee? If not, pass.
- 10-minute analysis — rough rehab estimate, quick comp check, MAO calculation. Does it pencil at a price the seller might accept?
- Full underwriting — only on deals that pass the 10-minute check. Run the complete analysis, lock comps, finalize rehab budget.
The investors who close 30 deals a year don't have better deals falling in their laps. They have a system that gets them to a pass or a pursue decision in under 5 minutes on most leads.
Run a quick deal analysis → and get a full MAO calculation, ARV confidence score, deal scoring, and risk flags in under 60 seconds. Know your number before you make the call.
What Your Buyer Sees When They Underwrite Your Deal
When an experienced flip buyer or hard money lender looks at a deal you're assigning, they run:
- Their own ARV using their own comps
- A rehab estimate from a contractor they trust
- A full cost stack: purchase, rehab, holding costs, financing, selling costs
- Profit at that exit price
If your ARV is 15% higher than theirs, your deal does not close. The wholesale business runs on credibility. Accurate analysis builds that credibility faster than any other factor.
Know your ARV. Know your MAO. Know your buyer's spread. Move fast on the ones that work.
Published 2026-07-31. Content by FlipCalculatorPro.