Posted by Rose Marie Parker on April 24, 2007 at 09:53:44:
I appreciate all your responses and I will apply your advice. Any other advice will be deeply appreciated.
Newbie doing first property flip! - Posted by Rose Marie Parker
Posted by Rose Marie Parker on April 23, 2007 at 16:07:22:
Does any body know the answer to the question - How do you know how much to pay for a wholesale property? I am about to do my first flip and I don’t have a clue about this. How do you figure it out? I don’t want to mess up.
Thank you.
Re: Newbie doing first property flip! - Posted by Lk
Posted by Lk on April 23, 2007 at 21:31:06:
Conservative After Repair Value - CARV (what will a retail buyer pay for the home in a reasonable amount of time)
(minus)
Closing/Holding/Selling Cost (if you don’t know use 10 % of sales price or CARV)
(minus)
Repairs (based on conservative estimate with contingencies)
(minus)
Profit (If you are buying to wholesale then you must add your profit and your buyer?s profit- if you are buying from a wholesaler, then its all yours)
(equals)
Maximum Purchase Price
So your formula is:
Purchase Price = CARV - C/H/S Cost - Repair Cost - Profit
If you estimate C/H/S Cost @ 10 % (which may be too low in some areas) and you desire a 20% profit, then your formula derives to:
Purchase Price = (ARV * 0.70) - Repairs
A simple formula used by many investors for a quick analysis. But be careful with your numbers. With a $12,000 overrun and a $12,000 reduction in sales price on a $100,000 home, you go from making a $20,000 profit to a $4,000 loss.