Not sure I am very clear on your question… I’ll give an example and ask your question in a different way if you like
A house if in perfect condition, and in the current market would sell for $100,000
But the house needs about $15,000 in repairs
The general rule of thumb would be $100,000 * .65 - $15,000 (Repairs) = $50,000 so thats 50 cents on the dollar.
Why * .65? because:
You will have to pay holding costs (paying bills, mortgage, tax, insurance…etc.) while you work on the house
You have to pay closing costs and probably agent commission when selling
You have to pay closing costs when buying
You need to make some profit as well
That is the max hard money lenders may lend anyway (depends on location and yada yada yada)
You should understand and study the cost of holding, buying, and selling to be able to negotiate and explain to the seller why you are not going to pay $85,000 for a house worth $100,000 when it needs $15,000. He may need to understand why the offer so low.
Oh and those deals are not that common, you have to dig deep and try and talk to so many sellers to find one of them.
Thanks…thats all I needed. I knew the math but never used in those terms. As I stated in the beginning, I’m new in the game. I’m enjoying myself with learning and the actual process. You even broken it down in plain english. I have played with the numbers from workbooks, but it was not reference to .50 on the dollar or what ever. Thanks for your support. Best wishes to you.
Fadi…I’ve read some of your past posting. I’m impressed with your experience and the wisdom you share with newbies. I would like advice with other concerns I have as a newbie, but certain not to wear you down with questions. I respect your time as an Investor (successful).
May I have your permission to PM you? I want to be on your team. My suggestion is to get a few newbies, walk them through a deal or two, make a profit and become long term partners. Thats my proposal to you. I’m in GA, the market is pretty good, I’m talking with sellers, I have no fear, just get stuck as to what next. What can I say I’m new and not ashame. I’m a full time debt collector trying to lunch a new career. I’m a US Navy dependent,relocate every 3 years. My long term goal is to purchse real estate in every state I reside and I’m seeking partners who are willing to become aggressive investors. Okak Fadi, lets do this, we are going to set the stage, I’m new but I know where I want to go!!! :beer