Buy and Hold Profit Margin

5 Replies

I was wondering if anyone can tell me how I should be thinking in terms of doing calculations on trying to make an offer on a wholesale deal for a potential buy and hold investor vs. a fix and flip investor. I know on fix and flip the general consensus is ARV minus @ least 30% profit margin to start (I already know about the other subtractions) but in a buy and hold scenario I need to also consider what the rents will be. Is there a formula I can use to determine how the ARV translates to rents (like if the house is worth X amount of dollars ARV it should generate X amount of rents)? Also when dealing with buy and hold investors do I still need to subtract the 30% off the top from ARV or is that a little more flexible since they will not be selling the property right away?

The ARV does not really translate to rents. Rental rates are set by the market, just like the appraisal value after rehab. However, they are different animals entirely IMO. I would offer up to 80% ARV on properties I intend to hold in most cases.

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Basically yes, I do want to buy below market, but with the market so strong right now, many deals at a 10-15% discount still fit my model, and I'm covered for the cost of selling if I need/want to sell.

You will find most buy and hold investors are very picky about where a house is, what school district, etc,,that is more important to me than getting a 25% discount vs a 15% discount.

Sounds like my best bet would be to find some local landlords and other investors, find out what they want, and go find it for them and when I find deals I need to do a separate analysis as to if this is a deal for a fix and flip or a buy and hold. Correct?