Hi everyone, can anyone share with me a basic formula to go buy to figure out what to offer on a house, when making an offer should I decide what I wanna make off the deal and subtract that from the total?
It depends on your area’s market, and for what type of investing you’re planning on using, but here’s the basic formulas I use:
For <$50k ARV:
After Repaired Value(ARV) - 35% - Repair Costs = Offer
For >$50k & <$75k ARV:
After Repaired Value(ARV) - 30% - Repair Costs = Offer
For >$75k ARV:
After Repaired Value(ARV) - 25% - Repair Costs = Offer
And the percentage is what your profit?
For me, I take the 65% tax assessed value and subtract what I want for my profit if it is a flip and that is my max allowable offoer. EXample:
TAV is 24k * 65%= $15600
I want 5k profit
$15600 - $5000 = 10600
My MAO= $10600
I assign my contract for $5000
Tax assessed value is usually fairly low compared to the true market value of a property. So, I go off of my own estimated after repaired value(ARV) for the property.
For a wholesale deal I ask for 5% of ARV for an assignment fee. The higher the ARV for the property the more I make.