it depends on what you want your business to be. many people think, and alot do excellent by just making real estate their business. but many others have businesses and use the money from the business to purchase real estate. it’s up to you what you want to do, overall. that’s where the business entity type is extremely important.
also, let’s say you make your business rei, strictly buying, fixing, refing and renting -then repeating the process (easier said than done, but doable), now that’s an exit strategy.
each business entity will offer you certain advantages and disadvantages as far as taxes are concerned. no post on here will give you everything you need to know, you have to talk to a CPA, or read “Deduct it” from Nolo. great book. there are MANY books that go into business deductions etc. now the real estate business offers many different tax advantages, but combined with a business entity buying the real estate, now you’re taking it to a whole other level.
i love getting into and learning about tax deductions, they’re amazing. at the real estate Expo in NY, this past month, there was a guru selling his tax program for 1500 dollars. and it was like sheep to the slaughter. for 1.05 in late fees from my local library, i got out Deduct It - most current edition and learned soooooooo much…and a lot of it turned out to be the same “hidden secrets” that the guru was selling for 1500 bucks! lol i love it.
anyway, as far as calculating a purchase price for SFH or commercial re, you have to realize that both are entirely different for one key difference - they are both appraised in totally different ways, for the most part. one has to do with comparative measures and the other value or income measures (how much money does it produce and can that be increased?)
too much to get into here. again a good book will do the basics.
the bottom line is NOI - Net Operating Income. What ever this is, if it’s a rental - then that’s what you can base your price on.
if it’s a rehab - you must realize that rehabing and the like is (i would consider) a bit more risky and speculative, unless you KNOW THE AREA COLD. but alot of guys use a very BASIC formula.
After Repair Value X .70 - Projected Repairs = Your Offering Price
so 100,000 X .70 - 10,000 = 60,000 your offer price
THIS IS BASIC.
the .70 is a measure for 70% of the VALUE of the AFTER REPAIR VALUE.
so if someone’s selling their house for 85,000 and you KNOW IT’S CURRENTLY undervalue a little, plus more with some light repairs - then you offer 60k (AS AN EXAMPLE).
There’s ALOT that goes into this and your numbers have to be SOLID in order for it to work. also market trends (locally) have to be paid attention to.
hope this helps.