How do I effectively underwrite properties?
So I have no money. And found out about how easy wholesaling was perpetuated on youtube. So when presenting potential deals to investors that were not even under contract yet I would get that price rejected because the numbers didn't make sense to the investors and countered with something even lower. The new price that would be given to me by successful investors would be rejected by homeowners because the price was too low. What are some ways that underwriting techniques that successful people do? How do they know rehab cost estimates without wasting peoples time? How do you know which discount makes sense or what equation do you use for underwriting? Is it too late to start given that I may have fumbled many potential relationships in REIA? I really dont blame them either though. How does one do it? (I'm currently studying)
1. Get really good calculating ARV. And in this market, you need to take whatever you think the ARV is based on sold comps in the area, and haircut that number by another 10-15%.
2. Get really good at calculating rehab costs. Ask a few house flippers and general contractors. See if you can get somebody to share their budget with you from another similar job.
3. Understand other expenses house flippers will incur (commissions, closing costs, staging, holding costs)
4. Write offers accordingly.
Using the above steps you will start with todays ARV, haircut by 10-15%, subtract estimated rehab costs, subtract house flippers "other expenses", subtract your fee. This will give you ROUGHLY an idea of what to offer the homeowner. But probably offer even less to give yourself some more room.
Thank you very much for your reply! So if I wanted a house at a 70% discount value, I would have to subtract 15% more just to play it safe?
