Making an Offer
This question may be more specific to my market of Washington DC but maybe you can still help.
I recently attended a REIA where a rehabber presented his latest flip and the entire process. At the end he shared his financials.
3 bed / 3.5 bath, ~1,500 sf rowhome in an up and coming neighborhood in NW DC.
ARV - $660,000
Rehab - $135,000 (He really spent $175,000 but that's because it sat longer than expected plus a few hiccups)
Purchase - $365,000
Based on what I've learned from REIA meet ups and about wholesalers, typically you determine purchase price and wholesale fee using the following formula:
(ARV*70%) - Repairs - wholesale fee = Purchase price
($660,000*0.7) - $135,000 = $327,000. That's not even with me taking out the wholesale fee! As a wholesaler I would have offered the seller anything under $327,000 because I would assume that a rehabber wouldn't purchase it for much more than that. Am I getting my numbers confused? Am I missing something? This is a situation that comes up for me fairly often. Should I really be offering more and how can I justify offering more?
Any feedback on this is greatly appreciated. Thanks in advance!