All Forum Posts by: John Jack R.

By all means use the rule of 70 as a base line. When you run your calculations on what your net profit will be after selling, you make the judgment call; that as the deal sits you make let's say $36,000 net profit and would be happy making $28,000 and therefore raise your offer incrementally.

When I first started out flipping, I came to the same conclusions as you and went against the grain. Ended up making less money then I should for my efforts and there were some very skinny deals. I then decided to persevere and use the rule of 70. 

Now, I just keep looking until I find the right deal. So at times I might be at the rule of 70 plus $6,000 but I am in the ball park. Generally speaking for the playing field that I am in I need to make sure that there is at least $65,000 gross profit before I pencil a deal. Of course it depends heavily on rehab expense.

Hope this helps

Hi I am looking to line up additional out of the box lenders to work with. Has anyone worked with Anthony Dadlani of A Plus Worldwide?

I would like some input thanks.

All of the above provide great input. The more available data means that hopefully you are able to arrive at an accurate ARV. Another criteria to take into account is supply versus demand at price point you are hoping to achieve. For example if your target price point let's say $150,000 to $170,000 price point in Las Vegas, current inventory levels are just over half of what they were a year ago December versus November 2016. This will have an impact on pricing pressure, since demand is higher than supply, classic pricing mechanism at work. This will have the effect of shortening days on market and increases the expected probability of achieving your price point.

OK so I take it the reason to have this rule in place is to be able to maintain your real property assets in the event of some type of financial apocalypse similar to the one that we experienced in 2008? 1. 25 cents equity. Why? Why not five cents of equity or two cents of equity or zero equity? Actually at the end of the day equity has nothing to do with it. Only when it comes to maybe the initial purchase because the lender requires you to have some skin in the game. The most recent crash proved that you could still maintain ownership of the property even when you experienced negative equity. As long as the owner continues to make the monthly mortgage obligation, and all other expenses associated with the property, in fact these obligations could be paid by anybody, the asset will not be jeopardized. So to my mind how much equity one has in a property is relative to one's own comfort level. It has nothing to do whether not you'll be able to survive a financial storm. In fact you're more than likely better off to have as little equity as possible so whatever money would be held in equity could be held as cash on the sidelines to be able to meet the ongoing obligations of the property. 2. 10 cents cash for every dollar of debt. Sounds nice but how is this grounded in fact? I believe the formulation of a cash reserve should be based on some type of relationship as to the structure the loan. Is it a short term interest-only note is it a 15 year or 30 year amortization. I'm assuming you're coming up with the formulation of cash reserve as it relates the amount of debt supposed to be able to service the debt and preserve ownership in the event of a financial crisis or zero cash flow. If you think about it you don't need a financial crisis a nationwide's financial crisis to lose property it would really be a personal financial crisis of zero cash flow or negative cash flow. It seems to me that what you're trying to do is come up with some general ground rules in order to maintain ownership of your assets that you've worked long and hard to obtain in the event of some type of financial crisis whether it be national or personal. as I've already shown equity has nothing to do with it being able to maintain your monthly obligations does. What amount of cash reserves you need really has less to do with a nice catchy phrase, but more to do with projected realities. The question you need to ask yourself is what is my preference? What are my total monthly obligations, insurance, utilities, taxes, HOA, maintenance and upkeep, payroll, mortgage etc. how long do I think the financial drought will last? The answers to these questions, will govern what you will need to keep in cash reserve, not what everybody else thinks, "oh that sounds like a good idea". Remember that there's one rule in business "cash is king". Keep as much cash reserve as makes you comfortable. No one has a crystal ball and will be able to predict that you need to keep six months or 12 months or three months or two weeks cash reserve. So really it becomes a matter of personal preference but also being realistic in what your true monthly expenses are. The good news though is at least you have some rules to go by in the event of some type of financial crisis or disaster.

Originally posted by @Charlie Fitzgerald:

Call the bluff...no COE rxtentendion and they can start over with a new buyer which will take significantly longer than the 3-5 days additional time you need.

 Thanks everyone for your input. I am somewhat in agreement with Charlie, at the same time I have to gauge their motive, and yes they could have received a backup offer with more money. I would say one out five deals that I do requires an extension maybe less. Thanks I appreciate everyone's input

I have always believed, that it's NOT "what you say" BUT "how you say it". I have been buying and selling properties for the last three years, and I have never had a problem in getting a COE extension, some times for as long as three weeks!  

Now all of a sudden, my realtor is reporting back that he is getting push back from the sellers agent, even when I am looking for an extension of a few days!!

Now there are a few differences from the past;

1. The agent I am using is very new in the business
2. The purchase price point is typically below $100,000

The message from the sellers' agent typically is "the seller is stating that you have to close by the XX date and they expect you to perform and they are not going to grant an extension!", and according to my agent they are quite confrontational. Weird.

The most I ask for is five days. I have JV partners on my deals and typically we need the extra time to get the documents in order, for closing.

If you have any insights I would be very grateful.

Is it my agent? Is it his approach? I do not believe that he is really creating any real rapport with the sellers agent and what are my options.  Can I get directly involved? Typically on all of my offers we close within three weeks or way less. Is it the sellers agent being "tough"? I know that I am in Las Vegas working in an environment where the agents are generally below par.

Any insights and surefire process, ideas or methods would be greatly appreciated thanks in advance.

My personal experience is that the world is split into several categories of people among them the doers and the wantabees. I am sure that I do not need to explain who is what and does what. Essentially I WANT THE DEAL! Like anything else just go for it. Just because some pinhead does not understand how to be successful in business, I go for it. They buy or they die. I essentially call them so many times and keep calling until the number is disconnected or they tell me to get lost. In my experience the high performers respond immediately. Sometimes even a blind squirrel finds a nut, and I am just having to hunt that blind squirrel down. Do not take it personally it is just part of life. By the way statistically at the Call Center level of outbound calling, it would take an average of 17 dials to get a live answer. And Yes Definitely give them a reason to call you back, Urgency and Call to Action are Key.

Hey Paul that's great. Reach out to my email etc is on my profile page

But I am still interested in knowing how different investors calculate ARV

I would like to know how YOU calculate ARV on a prospective FLIP.

And maybe this may differ from market to market. I am in Las Vegas.

My conundrum is this. When you run comps, you essentially get a series of points of measure;

1. Average Sale Price

2. Max Sale Price

3. Min Sale Price

4. Square footage

5. Average Sale per square foot

6. Min Sale per square foot

7. Max Sale per square foot

Now when I run a flip, my houses look almost brand new inside and out. So to compare the rehabbed product to the average sale seems to me to be asinine. Historically All my flips have sold quickly and at the top of the market price.

I do take into account the max sold price on the comps when calculating my ARV and typically I run my ARV as 80% of the max sale per square foot, making adjustments (normally down) if necessary based on neighborhood and if my flip is way over the average in square footage and this would push the total sale price way out of bounds. I believe calculating a realistic ARV is as much art as science.

Most people look at homes based on

1. Location the area they would like to live in

2. Price point or price range.

Now my strategy is simple. Offer a product infinitely so much more superior to what is being normally offered, then price is no longer an issue. Chances are, my house is not the first home the prospective buyer has viewed, and in comparison the other homes look like trash once they have seen mine, (please forgive me if you think I am being boastful). I have attached some Zillow links to some of my projects for your perusal and you tell me.

11116 Whooping Crane Lane, Las Vegas NV 89144. Purchase $194,000 Sold $300,000

Zillow Link http://www.zillow.com/homedetails/11116-Whooping-Crane-Ln-Las-Vegas-NV-89144/6909464_zpid/

4841 Anchorage Street, Las Vegas NV 89147. Purchase $225,000 Sold $326,000

Zillow Link http://www.zillow.com/homedetails/4841-Anchorage-St-Las-Vegas-NV-89147/7137596_zpid/

4913 Nebraska Avenue, Las Vegas NV 89107. Purchase $88,000 Sold $142,000

Zillow Link http://www.zillow.com/homedetails/4913-Nebraska-Ave-Las-Vegas-NV-89107/6959436_zpid/

7228 Sleek Avenue, Las Vegas NV 89129. Purchase $214,000 Sold $249,999

Zillow Link http://www.zillow.com/homedetails/7228-Sleek-Ave-Las-Vegas-NV-89129/6919527_zpid/

1831 La Villa Drive, North Las Vegas NV 89031. Purchase $164,000 Sold $205,000

Zillow Link http://www.zillow.com/homedetails/1831-La-Villa-Dr-North-Las-Vegas-NV-89031/6886798_zpid/

5409 Aegean Way Las Vegas NV 89149. Purchase $254,000 Sold $395,000

Zillow Link http://www.zillow.com/homedetails/5409-Aegean-Way-Las-Vegas-NV-89149/6900406_zpid/

The calculation of ARV is key, since if you follow the rule of 70% of ARV less repair, a lot rides on the calculation of ARV.

I am looking forward to your input. Thanks

Originally posted by @Omar Merced:

Wow to think I offered $280k and thought it was too much. I estimated the bid around 200-250k and the comps around $700k max. Good luck. 

 Hi thank you, I appreciate everyone's input, as Charlie puts it, two cents! Thank you. The plan is to convert it to a four bedroom four bath and as such ran the comps in that manner, so I am not sure how you developed your comps Omar but I would be interested. Two heads are better than one.

Those of us who are familiar with section 10 know that it can be all over the place but it is a very popular area for people to buy. If you have driven the area, you will see a lot of new construction going up with upper end homes . Omar maybe you want to JV? Ha ha. Thanks for the input.