Posted by Sean on July 22, 2003 at 14:51:57:
Well if your HML’s are like mine, 60% LVT 10 points origination and 15% interest only, and you want to not come out of pocket for anything or next to anything, you better use the following formula:
(ARV * .5 )-repairs = Maximum Offer.
As to how far below MAO, as low as you can get… no hard and fast rule. THe more beat up a property the lower you definately can go… the lower the asking price v its after repair value is also a good indicator of how motivated the seller is… but there is no bottom end really… just a matter of how big your grapefruits are.
Seriously though, low ball offers get accepted, but keep in mind. Your market will dictate what you can get a property for. Don’t get obsessed over the fact you could have saved 3k on the purchase price when you are looking at 20-25k profit on the deal. You can’t make that profit unless you get the property… go too low and you’ll find that your offers are getting accepted less often than they used to.
Get some under your belt before you worry about that extra 2 or 3k you could have saved in acquisition. The more you do it, the better you will get.