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?

Thanks in advance for your time!