seller wants around 60,000 for what will be a total rehab
house next door just sold for 120,000
rehab should be 30 to 40 thou
seems like the spread is there
get it in an assignable contract now???
auction the contract/house to highest rehab bidder
for no less than 70,000
keep my first ten
what am i missing???
You are already past 70% ARV if you buy for 60 and put this much in it. The spreade is too tight and you need to get for much less.
The house next door; is it identical? Has the subject property had an ARV appraisal done on it or at least a thorough CMA? I would recommend you get one of these two completed, by a totally independent third party, not you.
Once you have an ARV that you can hang your hat on, multiply by 98% – this is your targeted sale price – say, $117,600. Subtract your selling expenses and carrying costs. That’s about 15% (1-2% buyer’s closing costs, 6-7% RE commish, 4% carrying costs, 2% closing costs, including taxes – you are taking the HIGH END on these costs, right?). This leaves 99,960, call it $100,000.
Multiply this by 70% for a slow market, and you’re at your targeted TOTAL investment, including SOW costs.
If you want to market to a investor/contractor, and YOU want to make 5-10% you have to set it up for 70% LTV. If you plan to retail it, i.e. finish it yourself, you can set it up for 80% LTV. Because your WHOLESALE buyer needs to find a RETAIL buyer who will pay 98 cents on a dollar for the product, you need to make sure your contractor has at least 20-30% equity in the deal because they are the ones taking all the risk.
Your profit, should you have any, comes from being able to, 1) buy BELOW the MAO, which I suggest is max of 50K in this case, not 60K, AND 2) find ways to cut that SOW down from 30-40K to 20-30K.
Your FINISHED PRODUCT COST should be a MAXIMUM of 80% of the ARV if you’re the retailer and 70% if you’re the wholesaler.
I would suggest that this is a daunting challenge, but at the right PP, it can be done.
IMO, wholesaling is an advanced RE investment strategy, not something for the beginner :banghead. I’ll hang up now and take my lumps off the air.
(BTW, this assumes you’re a CASH buyer and it’s YOUR cash. If you use hard or private money, you’ll need to subtract those associated costs from your MAO).
ok so here is what I know now
yes the house next door is identical
marketed nine months ago at 160
and sold in december at 130 everything new(2 years ago)
does this make it a good comp ( i think so but you tell me)
for this house the man said he was offered 60 a year ago and would take that now
if i am looking at 70% arv that would 91000 (39000 for carrying and profit)
leaving 21000 for rehab ten for me and the owner gets his 60
sounds like you are right about 50 being the better offer number maybe 55 and I only take 5 for myself
so offer him 55
take 5 for the wholesale and turn it for 60
better??