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?
The way your numbers are, you have a great deal. If you were to offer the list price of $9,900 (unless this was a typo) and add repairs of $10,000 and $5,000 for an assignment fee you would have $24,900. This is 55.33% ARV. This would be a great deal for a rehabber.
In most cases, the list price wouldn’t be so low compared to the ARV. Then you would either use 60%, 65% or 70% ARV depending on what hard money lenders and other investors are using. You’re selling to other investors who would in turn probably need to borrow from hard money lenders. It’s key to know what their ARV % is.
Hey Demo,
Thanks for responding, but how did you come up with the ARV?
I didn’t come up with the ARV. I was saying, if your numbers were correct, you had a great deal. If you’re asking me how I came up with the ARV%, here’s how I did it:
$9,900 LP (your offer)
$10,000 Repairs
$5,000 Assignment Fee
$24,900 Total cost to buyer
Divide the $24,900 by the $45,000 ARV figure which you gave us and you come up with .553333333333 or 55.33%.
Where I’m at we range between 55%-70% ARV minus repairs. The higher the ARV the higher percentage we’re willing to pay. However, it’s my experience that a property worth $45K ARV really only matters in terms of rental income. What rehabber is going to buy any house and put any money into it just to turn around and sell it for $45K? When I find properties with ARV’s less than say $70K, i’m advertising the rental income minus purchase and repairs.