determining offer price
MPP=Sales Price-Fixed Costs-Profit-Rehab Costs
Here is my problem. If the fixed costs include hard money lender fees and interest, how do I know the what to use for my calculations if I don't know the loan amount (as I'm trying to find out what to offer)? Do I just guess? Use the listing price? Same goes for closing costs. I don't have the loan amount yet so I'm not sure where to get that number.
The other method is the 70% rule. As I understand it, you offer 70% of the ARV. Is that right? I have tried both of these methods and they each result in different numbers for offer price.
I know the septic has major issues and there are clouds on title, but these still need some research. Here are the numbers I have come up with:
ARV- $286,587.00
Current List Price -$95,000.00
70% rule- $200,610.90
Fixed costs:
Purchase costs
Closing $2,850.00
Hard Money lender fees $4,750.00 (I estimated 5% of the current list price)
Hard Money Lender interest $14,250.00 (I estimated 15% of the current list price)
Holding costs
mortgage payments $1,500.00
property taxes $1,000.00
Utilities $1,000.00
Insurance $200.00
Selling costs
Commissions $7,737.85
Closing costs $7,737.85
Home warranty $300.00
ARV- $286,587.00
Fixed Costs-$41,325.70
Profit- $20,000.00
Rehab costs -$70,000.00
MPP- $136,602.60
So the 70% rule says $200,610, and MPP says $136,602. The list price is $95,000.
Please, I need help! Any advice or suggestions would be greatly appreciated.