# FORMULAS

Here Im looking for simple formulas you use to invest, and maybe a little explanation if you use a lot of abreviations, as some of our new guests might not know that IMHO means “In My Humble Opinion”.

Here’s one I use:

Do a careful analasys to find what the different home in the farm (neighborhood) you are looking in are selling for ie a couple 3/1’s sold for and average \$80k in the last 6 months a 4/1here and there sold for an average of \$90k and a bunch of 2/1’s sold for an average of \$77kI would feel confortable saying I could sell a 3/2 for \$85k So I start looking and what Im looking for is 3beds 1-2(I prefer 3 beds) baths in the price range of \$45k needing only about \$5k in repairs or what ever the formula TELLS ME.I determined I want a 3 bed, I determined I want 1 or 2 baths I determined the end value is around \$80-\$85KI use the formula Retail (\$80-\$85) minus 30%(for profit and error)minus repairs AS LONG AS I AT LEAST CAN POTENTIALLY MAKE \$10k In this neighborhood I would use and alway do use the low end.SO break it down

``````                        \$80k retail
minus    \$24K (30%)
``````

minus repairs \$9K (for example)

Max purchase price =\$47k

What about holding?and realtor fee?that is a guess too.I tend to use 1 year holding and 6% realtor so in the example above.If I was using Hard money at 14% interest and had to hold for 1 year you would probably never find a house cheap enough.But for example sake lets say I pay \$4800 realtor fee(6% of \$80k) and \$600 tax and \$700 Insurance for the year thats \$6100 you would take away from the 30% so now your down to(\$80k times 30%=\$25,830) \$19,730 profit now lets say we hold it for 8 months and we were right on with our rehab and origional thought of 1 year holding and we paid \$47k for the home plus an additional 10 for rehab and closing that would be \$57k loan for about \$450/month X12 months =\$5400 you would subtract that from whats left of your 30% profit(\$26,300 minus \$5400) which leaves you with \$19,730 minus \$5400 =\$14,330
in your pocket minus taxes.Not bad for a month and a half work but terrible for a years profit .but if you can sell them in 3 months and do 4 a year not bad ;D

http://www.reiclub.com/real-estate-abbreviations.php

Formulas:

Pi (3.1415927) X radius X radius = the area of a circle

Pi X radius X 2 = the diameter of a circle

L X W = the area of a rectangle

L X W X H = the area of a cube

energy = mass x speed of light X speed of light

In a right triangle, the square of the hypotenuse = the square of the sum of the other two sides

1/2 base X height = the area of a triangle

LOL…shall I proceed?

In your exampe, the Max Purchase Offer (MO) should be:

MPO = (ARX X 70%) - (Repairs + Holding/Sales Costs)

Some investors use thinner profit margins. I buy and hold, so I use even thinner margins.

Keith

Keith,

Always a pleasure to see whats inside the mind of a genius.
Now whats in your mind ;D

…it is a vast wasteland of relatively useless knowledge, ala Ken Jennings…

Keith