I am running numbers on a foreclosed property. Asking price for this foreclosed property is
$460,000 The ARV is $593,945 with 10,000 rehab, $25,000 buyer fee and $12,750 is my fee. My max offer came to $536,250.00. As you can see my max offer is way more than their asking price. I used recent comps. The comps that I used were all recent sales, within one half mile and withing 20% of the sq
I would just like to ad that one of the forum pro's got a number of $397,000. If anyone can help me on how he got to that number; It would be the beginning of making all our dreams come true!!
I would really appreciate your help.
Thank you in advance.
@Karen Hurd Assuming your ARV figure of $593,945 is realistic, the formula Wholesalers often use is the 70% "Rule" which says that Maximum Allowable Offer = (ARV - R) x 70% (ie. $593,945 - $10,000 x 70%, = $408,761). Your ACTUAL MAO should depend on what other expenses you want to allow for, or who you intend to market the property to.
So if YOUR Buyer is also likely to be a Wholesaler, you need to make sure that the "70% Rule" still works for THEM! Maybe that's why your forum Pro took out a further ~$11k before suggesting your MAO be $397k? Cheers...
Just reverse engineer your offer. Start with the comps, and subtract all the other fees and expenses...and profits. The number you end up with is your maximum offer. The AP is just the seller's starting point. That may also be their end point (in their minds), but that has no effect on what your offer should be. The only thing that effects your offer is the formula above.
Don't offer higher. Don't negotiate to a higher number...you lose.
@Brent Coombs The "rehabber rule" actually subtracts the rehab costs After 70% of ARV.
@Karen Hurd We have no idea how you came up with your number. Always apply a little common sense to whatever number "your calculator spits out". Does it make sense to pay $526k, plus $47,500 in fees and rehab ($10k for rehab is probably not nearly enough)-$573k total- for something that may sell for $594k, less probably $40k in selling costs?????
What is the $25k buyers fee?
@Wayne Brooks Aah! Very good! "70% Rule" means MAO = (ARV x 70%) - R! (in this case, = $405,761 rather than $408,761, which gives an extra $3k wriggle-room for unexpected contingencies)! Excellent point, Wayne...
Thank you all for taking the time to answer my question as I greatly appreciate it. But, I just wanted to shout out a huge thank you to @Hattie Dizmond in the biggest way. Running the numbers was making my partner and I completely crazy. We were so confused, wasn't sure why we were confused and we were confused about being confused and that made us more confused!! Is that confusing or what? @Hattie Dizmond gave us a generous gift and touched us by the amount of time she took out of her busy schedule to show us exactly how to run the numbers. Now, we are no longer confused! Thanks @Hattie Dizmond and God bless ✝
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