Hey everyone I came across a motivated seller who may be willing to sell his house under market value lets say 250k or little less he’s trying to avoid using an agent, now the property is worth 310k and the last home has just sold in the same area around 270k. Do you feel this would be a good deal for a quick flip or should I shoot for a lower purchasing price?
how did you establish the $310k price? if the house in good condition, $250k might be good price depending on the average in your town. if you can get the price lower, then by all means do it.
If the recent comps say $270 - you might have a hard time justifying $310 as your ARV.
What are the repair costs for this property? You need much much less than $250 for this house.
The basic formula used by most investors is .7 x ARV - repairs. The 30% is the investor profit & the cost to buy & sell the house. So just run the numbers.
can you give me an example with real numbers
If the house is say worth $310k then you would have to take 70% of that, which is .7 X $310k= 217K. Now subtract your repairs, lets say $15k, which will be 217-15= 202. Now subtract your profit of what you want. Lets say $5k so $202k-$5k = $197k this would be your MAX offer so shoot out an offer lower than that then negotiate up to your max offer.
I’m a newbie so I may not know what I’m talking about, but if this place is worth $310 ARV and only needs $15k worth of fix up does the .70% ratio still stand up. I mean a bird in the hand is worth 2 in the bush. If you figure soft costs of holding and selling of about 10-12K then wouldn’t it be better to offer 230-235 (max) and come out with a profit of 50k. Please critisize (sp) from any angle.
Here’s another way of looking at it for higher $ homes:
ARV=$310
Repairs are $15K
15% profit for the Rehaber = $46,500
or a 20% profit = $62K
10% of ARV to sell the house (RE commissions & closing costs & some marketing): $31K
Here’s the math:
For 20% profit:
$310K - 62K - 15K = $233K - $10K (wholesaler’s profit) = $223K (maximum offer)
For 15% profit:
$310K - $46.5K - $15K = $248.5K - $10K (wholesaler’s profit) = $238.5K (maximum offer)
Of course, I did not factor in holding costs or repair contingencies. But this works.
I understand the math for both the 20% and 15% profit scenarios, but why is the $31k not being subtracted. Shouldn’t the max offers be minus $31k for commissions and such?
Whoops, my bad! Yes, subtract the $31K too.
We are in a falling market and the most recent comp is $270k, where did the $310k figure come from?