How to Calculate – Flip – Maximum Purchase Price

When purchasing a property, it's wise to calculate the maximum purchase price or best offer on a property by assuming projected profit and cost. To be used as a general rule.

ARV (After Repair Value) – The Estimated Value of the Property after all repairs are completed.

Repairs – Repairs that are needed to bring the property to habitable and working condition. In this case, also add any improvements to the property that increase its value.

Projected Profit – Once you sell, it’s the Percent of Profit you would like to make on this property.

   ARV
* Projected Profit %
-------------------------
= Projected Profit (sell)

  $306,000
* 0.15
------------
= $45,900

Projected Soft Cost – Once you sell, it’s the Percent of Cost that include items like Real Estate Commission, Architectural, engineering, financing, legal fees, and other pre- and post-construction expenses.

   ARV
* Projected Soft Cost %
-------------------------
= Projected Soft Cost (sell)

  $306,000
* 0.07
------------
= $21,420

Holding Cost (w/ mtg, taxes, ins, purchase closing cost) – Amount to keep property running during the Rehab Period like Electric, Water, Alarm System, Mortgage Payment, Taxes, Insurance, and Purchase Closing Cost.

   Holding Cost Mo.
* (Rehab & Listing Mo.)
-------------------------
= Holding Cost (x mos.)

+ Mortgage (x mos.)
+ Taxes (x mos.)
+ Insurance (x mos.)
-------------------------
= Total Holding Cost (x mos.)


  $100
* (2 + 1)
------------
= $300

+ $4,591
+ $525
+ $275
------------
= $5,691

Purchase Closing Cost (x %) – Closing costs when the title of a property is transferred from the seller to the buyer. The cost for the buyer can range from 2% to 5%.

   Purchase Price
* Closing Cost %
-------------------------
= Purchase Closing Cost (buy)

  $218,000
* 0.02
------------
= $4,360

Wholesale Fee – If this is a Wholesale deal it’s the fee that you would like to collect.

Maximum Purchase Price – The maximum purchase price or best offer on a property by assuming projected profit and cost. To be used as a general rule.

   ARV
- Repairs (Rehab)
- Projected Profit
- Projected Soft Cost
- Holding Cost
- Purchase Closing Cost
-------------------------
= Maximum Purchase Price (Client)

  $306,000
- $20,000
- $45,900
- $21,420
- $5,691
- $4,360
------------
= $208,629

Maximum Purchase Price Wholesale Fee – For a wholesaler, the maximum purchase price or best offer on a property by assuming projected profit and cost. To be used as a general rule.

   ARV
- Repairs (Rehab)
- Projected Profit
- Projected Soft Cost
- Holding Cost
- Purchase Closing Cost
- Wholesale Fee
-------------------------
= Maximum Purchase Price (Wholesale)

  $306,000
- $20,000
- $45,900
- $21,420
- $5,691
- $4,360
- $5,000
------------
= $203,629