This is the formulas I use, they work for me, just thought I would share.
House with an ARV of 140k or less
ARV X 70% - Tax,Insurance,Attorney - HML points (if buyer is using a HML loan) - Rehab Cost - My Profit (usually 5k) = MAX Offer
House with an ARV of 140k or more
ARV - 40,000 - Tax,Insurance,Attorney - HML points (if buyer is using a HML loan) - Rehab Cost - My Profit (usually 5k) = MAX Offer
I live in South Carolina by the way.
Could you explain why you use the figure of $40,000 for ALL properties over $140,000 and why you use the figure of $140,000 as the cut off for using the 70% figure. Just curious. TIA
How do you figure out the tax/insurance/attorney costs?
How do you figure out the HML expenses?
I’m heading out to look at a couple houses today and just got off the phone with a HM Lender. Here’s what they offer - instant loan (hours) - 18% - for 6 months - 10% down - interest only payments - no prepay penalty - plus other fees (didn’t get that fully explained, but I will). I’m thinking these are maybe some points or closing fees. So you also need to figure in these expenses as well — unless you are just going to assign the deal immediately to another investor.
The only taxes you would owe (if you took title only) would be when you sell it - your portion so that’s easy. Insurance would be insurance on the home. Or you may need to get title insurance which could run $1000 +/-
If you assign the deal, then none of these items would apply. I just talked with another mort. lender and he was very helpful in working these deals.
Checked out the houses … both in same neighborhood … going to pass … iffy neighborhoods.