WHOLESALE QUESTION NEED HELP ASAP

[riddlerx7]

It has been a while since i have dabbled in real estate and i was wondering if anyone could give me some advice on how to figure a wholesale value to sell, and how much to offer for a property.

[narmond]

It truly depends on the property, its condition, as well as its location, among other variables. The formula goes like this:

FMV * .70 = (Value from FMV*.70) - Repair Costs - Your Profit = What You Should Be Offering

This formula has been tweaked by folks to fit their particular situations. You should definitely get to know your buyers and their likes/dislikes regarding investment decisions. Once you know exactly what your buyers fancy, you can base your target areas and properties on their interests. As long as you stick with the above formula as your guide to construct offers, you'll be quite alright. Oh yeah, you don't have to stay within a particular price range unless you're only comfortable sticking to a set price range. I may add that you should be certain that you have folks who will happily invest in lower-end regions, similar to low-income areas where criminal conduct may be considered pretty much the norm, before digging in such environments, if you have the desire to farm these types of neighborhoods.

[JOHNNY Q]

Example questions:

Purchase price 185,000
Repair  30,000
sale cost 28,000
holding cost  21560
 
total 264,560
 
value 280,000- cost ( 264560)= net 15,440
 
 
So 280,000 x 70%= 196,000 ( lender cut check)
 
 so 264,560- 196000= 68, 560 need to bring to table to close.
 
 
 
Question, how can one rehab, when most of the profits are gone.
 
Here is what I was told :
 
ARV @ 70% - total cost = offer
 
ARV 280,000
 
196,000-  79560( total cost) = asking should be 116,440. So instead of a 30% cushion, one needs to be at 41%.
 
What right mind seller would sell a house at 116, 440 , when it can be worth 280,000.
 
 


280,000 X 10%( Cost of sale)( Agents and closing cost)= 28,000
280,000- 28,000= 252,000
 
252,000 -30, 000( Repair)= 222,000
 
 $9800 (5% loan origination cost)
$ 11760( Holding cost) 6 payments @ 1960 per month  (9800+ 11760= 21,560)
 
222,560- 21,560= 201,000
 
201,000 - 185,000( Purchase price)= 16,000 NET profits
 






 
 
 
 
$ 185,000. Home purchase price.
 $ 11,100 Agents cost.( 3% to buyer agent) (3% to seller agent.
 $ 7400 Closing cost ( 4%)
 
$203,500 Total cost
 
 
+$ 30,000 Repair cost
 
 
233,500  TOTAL
 
 
ARV : 280,000 - 233, 500= 46, 500
 
 
If rehab:
 
$280,000 ARV @ 70% LTV= 196,000
Lender cuts a check for   196,000
                                   185,000. Home purchase price.
 
 
11,000 for repairs
 
 
 
 $  185,000 Purchase price
 $ 11,100 Agents cost.( 3% to buyer agent) (3% to seller agent.
 $ 7400 Closing cost
 $ 30,000.00 home repairs
 $9800 (5% loan origination cost)
$ 11760( Holding cost) 6 payments @ 1960 per month   
 
 
Home will cost $ 255,060 when completed!   280,000- 255, 060 = 25,000 profit
 
 
 
Equity can increase if ARV is higher.
Equity can increase if rehab cost is lower.
Have the client seen the house  and do a home inspection? Did he get 3 estimates on the repairs?
Equity can increase if agents cost is lower.
Equity can increase if hold cost is lower. Meaning the house finish sooner.  Possible  saving!
 
 
So if you refinance out of hard money loan 280,000 loan into 30 year fixed. 
 
 
Example:
PV = 280,000
I/Y = 6%
N= 360
PMT = 1678
 

Rents ~$1500-1700

[nsu1997]

ARV x 70% - Repairs = MAO

ARV = After-Repaired Value
MAO = Maximum Allowable Offer

Never pay MAO. How much further below MAO you pay depends on the deal. The less desirable the house, the worse the real estate market, the more work it needs, etc the farther below MAO you offer. Now, subtract your desired fee. This is the most you should contract the house for.

[riddlerx7]

Thanks guys, this helps a lot. Do you know of a reliable site to see the recent sales history for an area for doing comps? I do not have MLS access.

[narmond]

You're quite welcome. If you're able to access your targeted county's online public data system, like tax assessor websites and such, you may have luck with having access to home sales data. I live in PA, so I can just visit my county's public access system and find recent home sales. There are online sites such as RealQuest, SitexData, DataQuick, and the likes that offer comparable sales information, but these services are only optimally beneficial if you're in a county that isn't lackadaisical with updating real property information.

[Mr Investor]

Thanks guys, this helps a lot. Do you know of a reliable site to see the recent sales history for an area for doing comps? I do not have MLS access.

Then get really chummy with an investor friendly Realtor because in order to get accurate comps you are going to have to get access to sale comps from Realtor's around the area.

Most investors won't touch a property if it doesn't have accurate comps.

[Rejin]

It is a nice explanation. I agree with you as most investors don’t like a property if it doesn't have accurate comps.