A Question for the seasoned!

[Raul F.]

First of all, I'd like to introduce myself and want to thank the community for the wealth of information created here. I looked around for a few days, and haven't been able to find an answer to my question, so I figured I'd ask! :D

Ok, so this is hypothetical and designed to help me understand the process to avoid hours of wasted time.

Let's assume I found a home that I wanted to put an offer on. I did my due diligence and estimated ARV at $100,000 (keeping it easy with round numbers :D). Because I read this forum, I know investors will only pay 70% of that value tops after repairs. Which means $70,000. I call my contractor, he tells me this house needs $10,000 in repairs.

This is where I get a bit lost, If it's 10K in repairs, an investor would only want to pay 60k because 60k + 10k = 70k which is 70%, correct?

Assuming I'm right, If 60K is what I can sell it for, and I want to make, let's say $3k on it. I would then offer 57K, correct?

If I am correct again, what would I do if I come to find out the current owner owes more than 57K on a mortgage? Do I call it a day and walk away?

[Jon Holdman]

You math is correct except that you have neglected the costs. You need to include anything you have to pay. That's highly variable depending on exactly how you are structuring the deal.

If the owner is underwater you would need to do a short sale.