I have been having a hard time lately finding leads. I don’t have the money to market them also.
My question is I know that you use the 70% formula when a house needs repairs. What do you think the formula should be for a house that does not need any repairs.
They have equity in it also?
It depends on what you are doing with it.
If you are buying it to resell it you normally still want it at around 70% of FMV. Why? You have costs to buy it, then costs to market it and sell it. These costs will range from 8% (done on the cheap) to 18% (done with full costs for agents, financing, etc), then you might not sell for FMV and need to discount by 5-10%, etc.
However, if you have someone in your pocket who wants to buy it, you can do the transaction for whatever profit you can get out of it, or a lower profit, potentially because it is a “sure deal”.
If you are buying as a rental, you need to buy it under proce and terms so the property will cashflow.
It depends on your local market. While most of the US market is woeful, there are still areas enjoying 5-15% appreciation. In those areas, you can buy with a little thinner profit set in because the increasing values will give you additional profit. Just be careful and not make your profit too thin, as a lot of investors got caught last year when the market turned on them.
And BTW, while the old standard was 70%, in today’s market most investors have lowered their requirements to 65% or 60%, especially in areas where values are decreasing.
it all depends how you plan on selling the house… you need at least 6 months holding costs discount, profit discount, and buying, selling, advertising costs.
i actually would just wholesale the property
So lets say it is worth $100,000
$100,000
- $6000 holding costs
- $7000 Closing costs
- $6000 Selling costs
- $20,000 Profit
- $5000 your profit
$56,000 Contract price