Analyzing a deal, need a little guidance...

3 Replies

Hey all!

I had a very motivated seller come to me today, with a home he purchased 4 years ago to rehab thru HUD. He's now taken on too much with the home, and in his words "Doesn't care what what anyone does with it, just wants it gone, it's gotten the best of me". This was late last night, so I haven't been able to get a price out of him yet, but I'm not worried about that at this point. I do know that he has done some work as new windows, some landscaping, work inside as well.

I pulled comps from the last 6 months, it's a small community located about 20 minutes from our large metropolitan in Iowa.  House built in 1896, 2 story, 3br 1.5 bath.

A fresh rehab sold on 2/12/18 that was built in 1900 and very similar for $111,9000

In January another property similar in size and year, not rehabbed sold for $112,500

And early January the third comp sold for $90,000

Based on the information, here are my numbers that I came up with, but feel like I'm off?  HELP

ARV- $90,000

Rehab Costs- $20,000

Closing/Holding Costs- $1500

Misc Costs- $2500

Assignment Fee- $5000

Total Expenses- $29,000

ARV- 60%- $54,000

Most I can sign for would be $25,000

I know I'm missing something, and it's late.  Any help is appreciated!  I don't want to jump on shooting an offer and end up being way off on this one.  

Thanks in advance!

@Brett Ladehoff , looks like you deducted your fee twice?

ie. It shouldn't be already deducted in the expenses, and deducted again in the "60%".

[Also, part of your formula was ARV x 60%, right? (Not ARV - 60%)] 

Also, Flippers might not be the only buyers for a property like this?

I doubt if the owner is that motivated to let you have it for (my estimated MAO) $34k.

Anyway, thanks for sharing/asking. Others may have (more) suitable advice...

Brent,

Yes, the formula is ARV X 60%, sorry the numbers were somewhat a world salad there.

I didn't deduct anything from the 60%, at $54,000.  It's common practice to deduct your assignment fee in the 60%, 70% or whatever formula you use?

Thanks again!

Originally posted by @Brett Ladehoff :

Brent,

Yes, the formula is ARV X 60%, sorry the numbers were somewhat a world salad there.

I didn't deduct anything from the 60%, at $54,000.  It's common practice to deduct your assignment fee in the 60%, 70% or whatever formula you use?

Thanks again!

I guess my point was: Where on earth did you get the "60% Rule" from?

ie. Who suggested that Flippers want to see a 40% profit after all their costs are deducted?

[You do want to occasionally get a Seller to agree to your offer, right?] Cheers...

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