Offer Confusion

You base it on FMV. What info have you read about making offers? Any books? There is a big learning curve. Just do what I did. Read 30 Days To Real Estate Cash if you can. And search "site:deangraziosi.com what to offer" in Google chrome and it will pull up a bunch of forum threads about making offers. Plus you can read the thread I made, and with my question about making offers without rehab (still unanswered). I tried to break down the numbers best as I could just for my own personal info, but it's based on the "30 Days" book so you'll have to read that to "get" some of the percentages.

Marc

If you are planning to wholesale it, you also subtract your wholesale fee. So 65% of FMV (or ARV-they are the same thing) minus repairs minus your fee.

That's a lot easier than what I was doing. Ha. But why and where does the 65% come from?

I got pretty much this: 85% to cover costs. 20% profit. Minus repairs. Minus wholesale fee. Minus room for negotiation. (Then just keep making offers until someone accepts?)

So wiggle-room: If I got a guy who's going to buy/hold/rent, I can lower anticipated costs from 85% to like 92%?

And if I got a guy who's OK with a 10% profit instead of 20%, I can also do less of FMV? Sound about right?

Marc

I Had Read That Before and somewhere I Read after doing all that you can turn around and sell to your buyers at 70%. I Think I Also Read A Post On here I Think From Matt Larson That He Does It From The Asking Price. That's Why All The Confusion.

use tool below

Yeah exactly. The answer is no way. Thanks for the tip about comparing what % below FMV foreclosures are selling for. Agent just sent me a list of 1700 cash solds in 90 days. So basically I think I can find a buyer or two, is what I'm saying... ;-]

Marc

Where does the 65% come from? You said it yourself... "85% to cover costs. 20% profit". Just eliminates a step.

This is a rule of thumb way to do a quick estimate of offer. You can adjust it however you want. But if your first buyer doesn't come thru, by using this formula you have more than one way you can sell it--to a buy and hold or wholesale or however else you want. Why not give yourself an edge? Or a better profit potential? Even a buy and hold buyer will be happier with a deal with better numbers and even more eager to buy more from you.

Don't make things more difficult. Don't overthink it. You will drive yourself nuts! Have you ever heard of Analysis Paralysis? I think that is why you did not get responses on your other thread. It was so overanalyzed that our minds got tired trying to go thru all your computations that were unnecessary. This is not being said to you in a mean way, so please take it the way that it is given. Believe me, we have all been there.

Welcome to the family!

Karen

Thanks for the advice, Karen. Yeah it was pretty well analyzed. A little bit overkill. (OK maybe a lot.) It made sense to me when I did it, but now it even confuses to me to go through all that.

Now in another thread the idea brought up that people ("investors") are paying too much for their properties. I don't think these are investors? Probably retail buyers? Matt Larson said that's our true competition in the livecast. Because take a look at these LP/SP numbers. Almost all of them sold at 90-100% and several of them are over the list price. Either the listing agent is doing a really good FMV analysis before listing, or I don't know. Anyway, moving on.

Thanks again.

Marc

Different things happen in different markets. You have to know what is happening in your area.

You also need to know what your exit strategy is. Some investors who are buying rental props may pay that high of a price because they are satisfied with what their cash flow will be. Is it wise? Who's to say? But if they bought our way, they could get more bang for their buck. They may also be newer "investors" that don't know any better and think they want to jump on the bandwagon before the market goes back up. But you cannot bet on that happening any time soon.

And you're welcome!

Karen

Remember Ali talking about finding buy/hold/renters. They don't or shouldnt' care about the "value" or preceived value of the property. All landlords care about is the ROI on the property. Sell the ROI for them not price.

IE: your 100k cash investment will return 10-15k per year.

The national average for ROI is 7% so just find the offer price that will give your investor that much in return.

Another way to do it.. is to make the rental value 1% of the sale price that you offer. That will give you enough room to make money on any deal.

Ie: rent is 1500 offer is: 150k