Offer Formula

http://www.deangraziosi.com/real-estate-forums/contracts-and-offers/8336...

http://thebaltimoreinvestor.wordpress.com/2008/05/28/the-maximum-allowab...

http://www.REIClub.com - When Making Wholesale Real Estate Offers, Here Are Some Investor Tips On Writing Up Your Real Estate Offer...

http://blog.timtaylorsuccesscoach.com/real-estate-investing-articles/the...

The standard formula is as follows:
(ARV x 70%) - repairs = Maximum Purchase Price

After Repair Value - Improve Costs - Quiet Costs - Minimum Profit = Maximum Offer.

The Fix And Flip Formula

1. Determine the after-repair value of the house you're looking at. Get an appraiser's help, or look at what similar houses have actually sold for (not asking prices). The price it's likely to sell for is going to be your starting point.

2. Calculate costs: closing fees, loan fees, document prep, homeowner's insurance, title policy, repair costs, interest on loans, property taxes, sales commission, fees, title policy, etc. You want projected costs of all four categories: buying, improving, carrying, and selling. Subtract all costs from the expected sales price.

3. Subtract a profit that makes it worth the effort. Now you have the highest price you can pay. You have to walk away if you can't get it for this price or less. You'll offer thousands less, of course, to give yourself negotiating room.

Hope this will help...Good Luck

Wow! You have it down. Real numbers and costs that allow you to come up with NET profit, not GROSS profit.
The only thing I would ad is if you plan to wholesale you need to deduct your fee from the purchase price also.

The formula you have for fix/flip is almost exactly what we do when we fix/flip ourselves!! When I wholesale a property I present my deals to my buyers using steps 1 and 2. I also look at current listings and currently under contract comps along with solds. I check to see if there is a percentage from listed price to actual sold price. Average price reduction needed to sell. How many properties are currently listed, average DOM. level of competition in the area etc.

So many times I see new investors putting out a deal with say, $30,000 Profit!!! However they forgot to deduct the costs you have listed in #2!! The deal does not sell because NET profit is $2.00.

Also, remember, different areas have different % of ARV formulas. La Jolla, California would be more like 85% of ARV where Atlanta, Georgia might be 60% of ARV. So like Dean says, you MUST know the local market.

Good work Michelle!!! Now go find some properties that the numbers work on and make some offers. How exciting this business is!!

Michael Mangham
Mentoring/ Team Building Nationwide
MD Home Acquisitions LLC

ARV (30 Day Sell Price) x 85%
Minus RETAIL REHAB
Minus $20,000 Profit
Minus Assignment Fee.

Is 100% Right!

KNOW YOUR AREA!