Posted by Jim (NY) on August 27, 2003 at 10:35:57:
If he’s doing the rehab himself, woudn’t it go like this (using your ARV):
ARV 55,000 (lower of the range)
ARV * 70% = 38,500
38,500 - 20,000 repairs = 18,500
18,500 - holding costs, etc. 5,000 = 13,500
$ 13,500 - offer price to owner to purchase
Profit = $16,500
Help with 1st Deal - Posted by James D.
Posted by James D. on August 26, 2003 at 14:00:08:
I am looking for advice on my first deal. I have a home I am looking to purchase to rehab for resale. The home is in a decent neighborhood with a mixture of rehabbed houses and run-down homes.
Purchase price: 20k
ARV: 55k-65k
The repairs are the part I am struggling with. The are a lot of repairs needed. I guestimate about 20k (exposed exterior walls, new roof, replace electrical and plumbing throughout, new siding, new drywall.) I have a contractor set up to look at the home in two days. I have one week to act on this.
My thinking is that if the contractor estimates the repairs are 20k or less then I will do the deal. How much should I rely on the contractor’s estimate? What would be your maximum repair cost estimate to still do this deal?
Thanks.
James D.
Re: Help with 1st Deal - Posted by Randy
Posted by Randy on August 26, 2003 at 16:17:03:
James you may not be missing anything. My response to your question was using well established formulas used by successful rehabbers. That is: Your maximum purchase price is 65%-70% of the ARV minus repairs. I think these AVERAGES have bee established because no rehab ever goes that simply. There are unexpected extras like when you pull of the sheet rock and find wiring that will not meet code ? it?s fine until someone touches it?then it has to be brought up to code. If you think it?s a good deal buying it, go for it - I hope it works out flawlessly for you.
P.S. I like matts post… Take your profit out of the purchase price
Not really a deal? - Posted by Randy
Posted by Randy on August 26, 2003 at 15:02:40:
Most rehabbers figure 65% ARV minus repairs.
ARV=$65k
$65K x 65%= $42,500
Minus repairs=$20k
Profit= $2,250.00
Re: Not really a deal? - Posted by James D.
Posted by James D. on August 26, 2003 at 15:23:59:
Hmmm. My math is as follows…
ARV: 65,000
cost: -20,000
repairs:-20,000
holding costs resale: -5,000
profit: 20,000*
What am I missing?
another take $ 8500 purchase price - Posted by mattc
Posted by mattc on August 26, 2003 at 16:05:12:
James, what about:
ARV 55,000 (lower of the range)
ARV * 70% = 38,500
38,500 - 20,000 repairs = 18,500
18,500 - 5,000 profit = 13,500
13,500 - holding costs, etc. 5,000 =
$ 8500.00 - offer price to owner to purchase
Caveat, never done a rehab, but from reading - a
lot- that’s more like the number I would think.
Others?
mattc