Formula ?

3 Replies

Hey guys,

I thought I heard of a math formula for doing the math backwards to figure out what a property should sell for.  Eg. If I know it will rent for x and needs y amount of rehab purchase price should be Z.   With x amount of dp

Maybe I imagined it, I don't know. Just maybe their is an easier way to do the math. Thanks

You can create any formula that you want. I am looking for properties that give me 8% NOI/Cost. I use a quick formula assuming a 50% expense ratio.

The formula is that estimated monthly rent times 75 gives me price + rehab.  This is the most I want to pay.  If I can get a property for near that amount I go further and start estimating the actual expenses of the buy and hold.

I hope this helps.

Bill

@James L.  Yes.  I like it better than the 50%, 8%, 2%, 1%, or whatever arbitrary "one size fits all" formula that is out there.  I'm not buying milk...I'm buying R.E....and every property is different.

I use two formulas.  One for Cash Flow and one for Cost to buy/rehab:

1 - CF:  Rent - Tax - Insurance - Property mngr. - Debt Service < Cash Flow requirement

2 - Cost (to Buy/rehab): Offer =ARV * 75%

My CF requirement is a minimum of $300/month.