Making An Offer On A Rehab....
First deal www.here.The house is about 2300 square feet,one of the largest in the nice area it's in.But it needs about 20,000. worth of www.work.The REA said that it hasn't hit the market yet because the estate is not settled but they would probably ask 60,000.I'd be willing to pay 50,000 + 20,000 for repairs because the house would sell for mid 90's.How far below do you usually start your offer and wouldn't I also give them an estimate of rehab to get the price down?Thanks for any input,feeling kind of nervous but at the same time ready to jump in and get my feet www.wet.Christie 8-)
Christie:
You need to start thinking about the maximum amount that you are willing to offer. Work backwards...ARV-closing/loan/holding costs-repair costs-selling costs-profit=maximum wholesale offer. You don't have to figure in your downpayment into the "costs" because that amount is deducted from the loan you need to purchase the house and you will get it back when you sell (assuming you sell as your out strategy). If you are going to sell using owner financing (lease/option or other), then you need to take that into account. You won't have the typical selling costs (real estate agent, etc.) but you are taking a little more risk.
So you need to take into account all your costs before arriving at a maximum offer...anything less than that number and you should be good. I have a link to a spreadsheet that shows you how to figure this, which I could email you...send me a note if you want it.
John
christie
To keep it simple I use the ARV x .70 - repair costs = Max. offer. Tjhis has work well.
Michael
John,
Can you send me that spreedsheet you have to calculate offer price? Send to **Please See My Profile**
Thanks!
Micheal,
Where you get the .70 from?
A little embarrassed to ask but there's no such thing as a dumb question, right? What does ARV stand for and how is it calculated?
After rehab value.
jmart
I got the formula from Steve Cook's book REHABBING FOR BIG CASH. It's a great book if you want to do rehabs.
Michael 8-)