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.
@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.
@James L. are you talking about a flip...SFH...? Are you attempting to determine after repair value?...
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!