Possible Deal - Posted by Kris

Posted by Randy on October 01, 2003 at 16:01:14:

Offer $10,950.00
ARV=$63,000
$63,000 X 65% = $40,950
Minus Repair cst-$20,000
Minus Profit-$5,000
Minus holding/Resale-$5,000
Your purchase price=$10,950

Possible Deal - Posted by Kris

Posted by Kris on October 01, 2003 at 14:52:03:

So, here is the deal, I found a house on the market originally for 63,000. It has been reduced to 39,500 and the tax value is 51,000. It needs at least 20,000 in work. I want to flip the property, so I want to make sure there is enough room for everyone to make a profit. I know this may sound like a silly question, but this would be my first deal and I want to make sure the numbers are right. My question is what would be a good offer so everyone wins. Any suggestions would be greatly appriciated.
Thankyou,
Kris

Re: Possible Deal - Posted by Brent_IL

Posted by Brent_IL on October 01, 2003 at 16:52:12:

Lately my posts have drifted into Ron Starr?s realm of ?negativity, :-)? but I think Randy is on the mark. You said, ?at least $20,000? in repairs. Repairs almost always run higher than the estimates. That?s why rehabbers add a ?fudge factor? and adjust their purchase offers accordingly. You need to firm that up before you make an offer.

You might find someone doing their first deal that uses the .70 of ARV starting point and luck out and pick up a few points, but then again, Randy may be an optimist. As Jim said, the ARV is critical. Scheduling of repairs isn?t always a cake-walk, either. Holding costs might run more than you expect. This is a very tight deal, be careful.

Re: Possible Deal - Posted by Jim (NY)

Posted by Jim (NY) on October 01, 2003 at 16:14:03:

Kris,

  1. What’s the ARV? Just because it was listed for 63k, that doesn’t mean it is worth that amount. Ignore the tax value - it’s irrelevant for these purposes. What are the comps?

  2. Let’s say the ARV is 63k. Multiply that by 70% (could be 65% depending on what soft costs will be).

  3. Subtract from the above your repair estimate and your profit. The result s/b the amount you offer.

Now, it’s very, very important to get your ARV right! Don’t go by what someone else is telling you the property is worth - verify it for yourself!

Jim