Posted by jasonrei on August 11, 2003 at 18:12:59:
My HML (who doesn’t do CO) would go 65% of $225k (ARV), minus $15k… so roughly $131k.
If this deal was on MY plate I would run numbers like this:
minus 15k repairs
minus 20k holding costs (6 mos. interest on the HML, taxes, insurance, lawn maintenance, interest on the investment my HM loan doesn’t cover)
minus 17k sales costs (4% agt commission, a little advertising, closing costs, buyers costs I might pay, additional repairs the buyer may want me to make)
Equals about $173k to work with for purchase and profit.
I’ve never bought a deal over $115,000 so I don’t know what kind of profit I’d look for on this. Maybe as little as $25k depending on the “feel” I got for the deal. I’d also figure in $5-6k in costs for the hard money loan. So $173k - $31k = $142k is about what I’d pay for the house.
The 70% of ARV less repairs formula happens to be what I’d pay, too. Cool. Notice I didn’t plug in a fudge factor of 10% like a lot of other investors would.