Calculating numbers to make an offer
Hello guys,
I am a newbie and I have a question about calculating numbers when making offers to agents. I am planning to make 2-3 offers a day to an agent in Los Angeles area, but when I calculate my offers, it seems like I have make crazy low ball offers to make 15%-20% profit from ARV.
For example, if the bank listed the REO property for $439k, and the ARV is $500k how much would you guys offer without seeing the property. Some rehabber told me that investors usually calculate 12% of the ARV for the repair cost and try to get 15%-20% profit from ARV. I know it is best to go see the property with a contractor. Do you guys go see the property with the contract for every property you guys make offer for?
This is the list of costs in Los Angeles area for $500k ARV property in Los Angeles.
Excrow Fee, seller agent fee, tax, notary, inspection, etc = $30,674.50
Private lending fees at 8% for 6 months (1% each month +2 points) = $32,800
Repairs at 12% of ARV = $60,000 (in zillow pictures, this property is in pretty bad shape)
Closing Cost 1.5% = $4,972.50
Based on this calculation, I have to offer $325k to make $48k profit (This is about 10% of ARV). I gave this offer to the agent that is helping me and she is saying that they won't look at this offer unless I can bring it up to $420k.
I went to a meetup and the rehabbers told me that they put in about 150 offers a month and get about 10 accepted. I am hoping to get to that level, but I think my offer right now will be too low for them to even look at it.
Is this how you guys make offers to an agent? Is it normal to submit many low ball offers like this and hope that few will get accepted?
Any feedback and advise will be appreciated.
Thanks,