ARV: $210,000 Asking Price $150,000
Repairs: $16,000
Fee: 3,ooo
ARV x .65 = $136,500 - $16,ooo - $3,000 =$117,500 to seller
I should then put $3,000 on the assignment form.
Does there asking price of $150,000 have anything to do with the offer?
This is my first deal and it just doesn’t look right to me.
You have no holding costs (taxes, insurance, utilities, closing costs, etc.) accounted for…
Keith
I thought all I had to do was assign it to an end buyer.
I actually got 112k to offer the seller based on some of your numbers.
Based on your given figures:
ARV: 210k
Fast Sell factor: 21k (or 10%)
Fast After Repair Value = 189k (210K-21K)
Profit = 25k (rehabbers profit)
Cost of Purchase = 4k
Cost of Repair = 16k (this is the figure you gave)
Carrying Costs = 8k
Cost of Sale = 13.23k (6% of fast after repair value)
This amount is what you present to your buyers: 189 - 25 - 4 - 16 - 8 - 13.23 = 122.77
Your assignment fee could be 10k
This is the amount to offer Sellers: 112k (122.77 - 10)
Please note that I used some of my own numbers, like carrying cost, cost of purchase, etc. I was just trying to give you an idea on doing more research so you can better evaluate the numbers. I also used the fast sell factor, mainly because it’s hard for rehabber’s asking price to be retail without buyers asking for a discount!
The 150k is what they want for the house. I don’t think it has anything to do with your offer, unless your numbers match their asking price.
Thank you for the numbers. I really appreciate it.
You would be correct. All those costs (holding, closing etc) are built into the 35% multiplier.
Your calculations are spot on, but keep in mind that the number you ended up with (called MAO) is just a guideline…you must take into account what cash buyers are paying for similar houses in that particular area. For example, MAO may be $117k but if cash buyers are only paying $85-100k then you’ll never sell it. One good way to find out what cash buyers are paying is to Zillow the property address and look for the low comps. That’s what the junkers are selling for.
Their asking price matters because the closer it is to MAO the better your chances of getting it at your price. And vice versa. Your goal is to find out the least they’ll take for it. Ask them “if I paid you all cash and closed quickly what would be the least you’d take?” then no matter what they say then you ask, “is that the best you can do?”
The best way to tell if the numbers will work is to know in advance what % of retail your buyers are willing to buy