Posted by Bert G on March 27, 2000 at 14:14:42:
Are you planning to hold this as a rental, or fix up and resell? There are some numbers you haven’t provided that are essential.
How much would the property be worth in perfect condition after repaired value (ARV)? Is it worth the same as your $79K property?
What would it rent for?
If a rental, what would be your monthly expenses?
One renouned guru has a formula for buying houses to rehab and sell. Take the ARV times 70% and subtract the repairs. That should be the absolute maximum you should offer, and you never offer the maximum. (ex: $80,000 ARV X .7 = $56,000 less $5,000 repairs = $51,000)
For rentals to hold, I have an analysis form I use thats a little complicated to go into here, but if you e-mail me I can FAX it to you. Basically subtracts the desired cash flow from the NOI to show what’s available for debt service to figure the maximum loan the property would support, then adds what you are willing to pay up front to arrive at an offer. My form assumes you won’t put down more than the PCF will replace in 5 years, but you can tweak it for your own needs.