Investor · Claymont, DE · Member since 2016 · 19 posts · 3 votes
Hi BP! This is my first post, and I'm really excited to get some feedback from some more experienced investors here. My question is as follows...when considering the purchase of a fixer-upper property to fix, hold, and rent, what would be a wise max offer price in order for it to be a "deal".
I was thinking of using the basic formula of 70% of the market value (based on comps) minus the estimated repairs. Is that too extreme? Would 85% or 90% of the market value minus repairs work as well considering my intention is to hold and not to flip? Or would that be foolish?
Watch some of the podcasts and webinars on this topic. Then you have a calculator in tools up above that you can use to fine tune your offer. Also, there are some rules of thumb you will hear about.. these are fast and furious numbers... rent should pay 1% of the cost... some like 2%. Then everything is specific to your area and NYC may be hard to use any rules of thumb. I think you can only use the calculator 5 times so wait until you have a deal or time to watch webinars.
^Well said @Paul Gilo. You need to use real numbers, not ratios. On a $100k house, 90% of ARV only gives you $10k to work with; on a $1M house, it gives you $100k.
Ratios are for giving you a crude outline of something from the outset. You have to look at the property in a holistic sense.
Thank you @Paul Giloand @JD Martin. That advice makes a lot of sense. I'll stay away from the crude formulas, and focus on the actual numbers on a case by case basis.
