Burned out shell for purchase - Posted by KL

Posted by JB on July 27, 2003 at 14:31:38:


A good formula to use when buying wholesale is: 70% of ARV (after repair value)- repair cost.This formula is known as MAO or( max allowable offer). In your case fire damage property which needs to be completely gutted could be very expensive. I would get some bids on the work before you can really get an idea of what to offer. Rehabbers usually expect 20%. So for example on $100,000 house (ARV) X 70% = $70,000- 15,000 (repairs) = 55k MAO. By the way you always want to offer under MAO and work your way up to MAO if you have to, but never go over that or else you will compromise your % return.

Burned out shell for purchase - Posted by KL

Posted by KL on July 27, 2003 at 08:17:33:

Hello all, I am a newbie and this is going to be my first deal. I currently have the opportunity to purchase a burned out shell in a very hot and upcoming area where I live. The problem is honestly I don’t know where to start in calculating my offer to the owner. My wholesale buyers list is ready. Are there any formulas that some of you use to calculate this? Here are some details …

Property records show:
SFR (townhouse) built 1910, 4 br/ 4 ba. 3 levels, 2070 sq.ft
last sale info on the house was in 1987 for a purchase price of $85,000.Land is currently assessed @ $61,890, Improvements @ $46,440 for a total value of $108,330.
The last sale prices for similar properties in the 'hood are around $210,000.

It’s my gut feeling this will need to be a total rehab though, so I’d like to come up with an offer that will leave enough profit for a rehab investor to make it a good deal. Please help?!