Hi, I am really pushing to get my wholesaling business off the ground. I’m looking to stop questioning myself and just take action…with that said, I have some questions and could really use some help. I need to know how to calculate if I am buying a property at 50 cents on the dollar. Also, how can you find out the ARV of a property? How do I properly analyze a property to see if it is a good deal? I know I just threw a lot out there but I could really use some help…thanks in advance! :biggrin
Get with a real estate agent they can run the numbers for you.
Hey Miz,
What you are asking is far too complex to put in this response. But, I will do my best to help you out here.
I provide my students with a “max offer calculator” that does all the work for you, taking out the guesswork. This is what you need. It looks something like this:
ARV $100,000
Max % of ARV 60%
Repairs $10,000
Closing Costs (%) 3%
Holding Costs $485
Wholesale Profit $10,000
Max Offer $38,500
Rental Rate of Return:
End-Buyer Cost Basis $60,000
Max Rent $850
Projected Monthly Expenses $136
Cap Rate (Rate of Return) 14.28%
You can’t see the calculations because it’s in Excel and has the formulas built-in. So, what do you do if you have to do it on your own? This should suffice:
ARV x .6 - repairs - closing costs (3%) - your fee = offer
Now, understand that is calculation is a simple one. To fully understand your offer, you need to understand what kind of deal this is, who the buyer will be, etc, etc.
To find out the ARV, you need to use a site to pull comps and then determine what the ARV is. The MLS is the best, by far. After that, it’s a crap shoot. There is a science behind determining ARV these days. And, to answer your last question, there are many factors that determine how good, or bad, the deal is. Things like neighborhood, price, the existing loan, repairs, CAP Rate and Return (for rentals), etc, etc, etc.
Again, no way I can give you all the info you need in this response. But, hopefully this gets you going in the right direction.
Take the comps on Zillow (not 100% accurate EVER) then look at sold comps in the area. If you find 10 comps add them together divide by 10 (AVERAGE) Then take the Square footage of the sold comps add all 10 together Divide by 10 (AVERAGE) Then take the average Comp and the Square footage Divide and figure out the average price per square foot (PSF) Now take the house that you are looking at find out the square footage multiply by that number… That is about as close as you can get to the cost of the house as long as your sold houses are comparable to the house you are selling. Then deduct the repairs and if you need it at 50% divide by 2…