Analyzing numbers for investors

3 Replies

I thought this would be a good question to ask. How does the analysis of a deal change depending on what you are looking for? Its obviously going to be different from a buy and hold standpoint versus a flipper's point of view. I would love any input from flippers and long term holders(or anyone else for that matter). This may not be important but, I'm asking because I want to get into wholesaling and it would be good know what makes a deal attractive to different investors. Thanks Guys and Gals!

-Doug

In my case, here is what I am looking for:

Flips - I am looking for a spread on the property, a profit margin if you will. I will take the ARV and subtract a % from that number and then subtract my rehab costs to arrive at my maximum purchase price. The spread I am looking for depends on what area of town that its located in and can range from 20% to 30%. Anything more than 30% and I would never do any deals in my areas with all the competition.

Rental Property - This is just a pure yield play for me.  I take the price of the property plus any rehab needed to arrive at an Asset cost.  Then I determine if I can collect annual rent of between 12% and 15% of the Asset cost, depending on area.  In my target areas, even a former meth lab would rent in that range :-)

You are really just going to have to build a profile with your buyers to see how they operate.

Awesome Stan, thanks for the response. That is kind of what I was thinking, but I'm not a flipper ya know? I'm definitely going to start asking what some of the local investors are looking for. 

The basic answer to your question is "nothing changes".  That's because I set my criteria and stick with it.  If I rationalize myself into a bac deal, away from what the numbers tell me, I lose.  The numbers don't lie, so don't argue with them.

I am a holder/refi guy. My deals must allow me to cash flow at least $300/month (with a PM in place), and support the monthly payment of a refi. It must also have enough spread to be able to refi in 6 months after purchase, and the 75% ARV I can get on a refi must give me back my initial investment...so I have no more cash still in the deal.

Joe V

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