I am looking at this property with a LP of 9,900. I want to wholesale this property but I am not sure of the right calculation to use to determine my offer amount. Should I use 70%, or 65%LTV, I’m confused.
ARV 45,000
Repairs 10,000
Can someone help please?
Purchase price and cost of repairs plus Your Profit can’t exceed 70% of ARV
We use an “adjusted after repaired value”. Basically we take the
After Repaired Value
(minus Repair Cost)
= Adjusted After repair Value
Based on we typically use 70%. I think anything under that will create a profit for you as the wholesaler.
So do you loan 70% of the ARV or 70% of the Adjusted ARV?
Good Questions
So we loan 70% of the Adjusted After Repaired Value. So basically the more work the property needs the less amount we lend.
OK! Let me try to better understand based on a simple example
ARV $100k
Scope of Work $20k
Purchase Price $50k
You would take $100k -$20k for an Adj-ARV of $80k
You would then lend 70% of the A-ARV or $56k
Per your website on a 4 mo. term you would charge 4.5% or $2,250
I assume you make the borrower escrow the cost of repairs…correct?
Thus the borrower would bring $14,000.00 + $2,250 = $16,250 + CC
Is that correct based on the above scenario?
Thanks!
So this is how the deal would work
ARV $100,000
Scope of Work $20,000
Adjusted After Repaired Value $80,000
We then lend 70% of that so loan amount $56,000 or purchase price whatever is less. So in the example you gave we would loan $50,000 since that is the pruchase price.
We do charge points depending on how long the loan is for. However this is added to the loan amount and is paid when the borrower pays off the loan. However the points have to be taken off the loan amount. So in the example above at $56,000 the points woudl have to be taken off so that woudl reduce the loan amount to lest call it $54,000 or purchase price whatever is less.
The borrower would not have to bring the points to close and in some cases they woudl not have to bring closing cost if there is enough value in the property. HOwever in some cases they woudl have to bring closing cost. But the borrower does not have to pay any points upfront. They are paid when the loan is paid off.
As far as repairs; repair money does not need to be escrowed. The repairs can be paid as they go and can also be put on Home Depot account, net 60 or 90 terms withe carpet people or whatever the borrower can work out. But we do not require these funds to be put into escrow.
Not a bad deal for a borrower, dont you think?