I appreciate some of the responses i had to yesterdays questions. My next question is : When i am looking for properties i usually start at 65% of arv, minus repairs.The way i was trained, and i hope this is correct, was to take the arv, subtract 25% for profit, holding, and closing costs,plus $1000 for incidentals, then subtract either $10 per sq. ft. if light repairs are needed, or $13 per sq. ft if heavier repairs are needed. Add $2 per sq. ft. if roof, ac, or foudation needs heavy repair, to be safe.Then subtract your assignment fee, and you get your maximum allowable offer. Let me know if this is correct, or if their is a better formula. Also, what is the best way to build a buyers list in Dallas/Ft.worth,Tx
what’s up J? My view though is that the formulas that are often taught by gurus are (for the most part) a bunch of crap! The offer formula doesn’t have to be that difficult. Seriously. It should be a formula that your grade 5 nephew can make sense of. All you need to do is ask a realtor for comps. Then take the average SOLD comp among the properties. Then look under where is says DOM (days on market). With this info, you now can tell what houses sold for and how long it took. So now you can advertise that property in a way that is more concious for that particular area. So lets say average time in that market is 30 days, and houses sell for 300k. You can reasonably expect therefore if you advertised that property for 30k discount below market value with a property in similar condition you are likely to sell quicker than 30 days. Simple, simple. Now if the property is below condition-wise than what the others have sold for, now you can incorporate those sq ft discounts you had for roof, foundation etc because that makes sense. However I think that instead of $2/sq ft, I’d do more like 4 or 5 per sq ft. Not saying the formulas make no sense you started out with. But not every seller will agree to sell for 50 cents on the dollar! Now many deals are left on the table because an investor isn’t willing to think creatively and simplify their math. A lot of times I think these gurus push these more complicated ways of investing just to sell more courses.
Thanks for the info. So do you think my numbers are good enough as far as the holding costs, repairs.
I think so, yes.