# Does THE FORMULA work in Coastal SoCal? - Posted by Aurelia

Posted by Ronald * Starr(in No CA) on September 09, 2003 at 16:33:43:

Aurelia–(CA)--------------------

Why don’t you contact the rehabbers and ask them directly? That makes the most sense to me. You’re going to have to do that to be effective anyway. So do it early on.

Good InvestingRon Starr**

Does THE FORMULA work in Coastal SoCal? - Posted by Aurelia

Posted by Aurelia on September 09, 2003 at 12:41:44:

This may be a stupid question, but…

Does each aspect of ‘the formula’ given below hold firm in Coastal Southern California? (Thanks to Larry for a great overview of ‘the formula’ which I took from his previous post)

I am interested in starting to ‘wholesale’ (flip) properties and need a good idea of what rehabbers will pay (yes, I am contacting people directly, but would like some feedback from the board). Assuming the below formula always works (or at least most of the time), what are the dynamics that make this formula more elastic?

Arv x 65% - repairs - c/c/cost - af = mao
a) Arv = after repaired value
b) Repairs ? use the evaluation sheet
c) c/c/cost = carrying and closing cost
d) af = assignment fee
e) mao = max. allowable offer

For example, 65% of \$350,000 (median home price where I live) is 227,500, a difference of \$122,500. 80% of \$350,000 is 280,000 (still a difference of \$70,000).

Does starting a bit higher because of the dollar values make sense, or are folks still sticking by the formula? Assume that my estimate of repairs and closing/holding costs is fairly accurate and is also deducted from the ARV to arrive at the offer amount.

My goal initially is just to learn my market and how to find deals (and how to calculate repairs), but I need to make sure I’m making offers that make sense to flip.

Would like to hear from folks who rehab in or around my area (San Diego), but anywhere in SoCal would be good. How much are you looking to make on each deal?

probably not - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on September 09, 2003 at 12:58:57:

Aurelia–(CA)--------------------

Well, if you mean will it be possible to make money if you are able to buy properties using this formula the answer is yes, certainly. If you meal will it be possible to buy properties using this formula the answer is probably not.

There was an interesting post about ten days or two weeks ago from a So. CA. investor on this matter. That poster indicates that it will be virtually impossible to buy properties at that kind of discount. And, knowing what it is like here in No. CA., I would agree with that assessment.

You’ve heard of good news, bad news jokes? Well what you just heard was the bad news. The good news is that you don’t need that big of a margin to make a healthy profit, since the values of the houses are so much higher than in most of the country. Suppose you could make just 8% on the sale of a \$500K house? That is \$40K in one pile. Do that a couple of times a year and you are starting to make enough money to stop commuting to a job.

Good InvestingRon Starr*

Restating question - Posted by Aurelia

Posted by Aurelia on September 09, 2003 at 14:42:11:

Apologies if my question was unclear. I’m not used to posting (hopefully I’ll get better).

What I meant was: how much does a rehabber need to make on a deal in SoCal? Is there a formula (other than the 30-35% of ARV)?

My goal will be to find appealing deals that make sense for both the rehabbers and me (the wholesaler), but I also want to be realistic when making offers.