Figuring The Numbers For Purchasing
Hey y'all-
Just wanted some suggestions on how to price my offers for buying the whole sale properties. I've heard that people offer 65%, and I've heard that other just want 20k worth of equity. I'm sure there's not a cookie cutter process, but if there is, does anyone have ideas? Or if anyone cares to share their method of figuring a price, please contribute! I know that JefferyAdam has stated time and again that you need to consider
Purchase Price: Understood
Acquisition Cost: NOT understood
Rehab Cost: Understood
Carrying Cost: NOT understood
Sale price: Understood\
Thanks in advance,
Patrick :-?
You are right. There is not a cookie cutter process. You may find a house that you can flip quickly in a great area and you may settle for $5000 because it is such easy money. You may find a house with so much work that you would want $100k in profit before you would tackle the problem.
I take into consideration the aqusition cost (purchase price plus closing costs), repairs needed + 10%, holding costs, and sales costs. I look then at what I could get out of the property and look at my profit number. Your gut will tell you whether or not it is worth your time or if there are better deals to put your time/money/effort into. I created a nice little excel spreadsheet that I enter variables and it spits out things without me having to pull out my calculator.
GOOD LUCK
Thanks for the continuing advice myfrogger, I'll keep that advice in mind, as long as creating my own spreadsheet.
Thanks again!
Patrick
Tried and true formula -
After Repaired Value x 70% minus repair
cost = your purchase price.
Example:
After repaired value (ARV) = 200k, needed repairs = 30k
Then 200k x 70% = 140-30 = 110k you pay
In this scenario you'll make money.
Also, it accounts for the fact that you should make more when you have more money
out.
In reality, these ratios are hard to get in hot markets, so adjust your multiplier up to 80%
if need be.