Offer Formula

I use:

ARV x 85% (this will include most all your costs already, closing realtor, holding)

Minus repairs

Minus my fee

Minus profit your buyer needs (ask them) mine are usually at least 15-20%

This is basically what you have above, just a little streamlined.

Karen

Thank you so much for the formula. I will use that in the near future. It does make things easier. Thanks once again.

Thank you, so very much!

Here is a formula that a lot of active wholesalers are using to compute whether a house will be a good deal or not. The formula is solving for the After Repair Value (ARV) or what would be known as the market value if in good condition.

(ARV x 70%) - Rehab Costs = Wholesale Price

Some investors are either looking for greater profit or unwilling to take as much risk, so their formula is this:

(ARV x 60%) - Rehab Costs = Wholesale Price

This formula does not work well in highly competitive areas.

I'm having difficulty figuring out which method to use as well. There seems to be 2 or 3 methods.

1: Asking price x .75 - repairs - wholesale fee

2: ARV - 15% - repairs - investor's profit - wholesale fee

3: ARV x .75 - repairs - wholesale fee

CONFUSING!

AaronD

go Higher

Markets are different all over, so you Have to Adjust

I needed this formula info. badly

Hello Everyone,

Some great examples of formulas to use. The outline of the formulas that have been discussed in this thread are all correct. The great thing about real estate is that it is flexible so don't be afraid to adjust your formula according to your exit strategy and what your buyers want. Here are the formulas we teach at to all the students:

Birddog/Assignment of Contract:

1. ARV $100,000

2. 30% off of ARV (30% = 15% of closing cost, holding cost and realtor fees the other 15% is the investors profit) $70,000.00

3. Repairs $15,000.00
Investor Pays… $55,000.00

4. Your Profit $2,000.00-$5,000.00
Max Offer $50,000-$53,000

MINUS 5%-10% for negotiation room and start your offer from that point = starting offer at $45,000-$47,700

Double Close Formula:

1. ARV $100,000.00

2. 30% off of ARV (30% = 15% of closing cost, holding cost and realtor fees the other 15% is the investors profit) $70,000.00

3. Repairs $15,000.00
Investor Pays $55,000.00

4. Your Profits $7,500.00

5. Transactional Lending $3,500.00
Preliminary Total $44,000.00

6. Closing Costs $1,320.00 = (44,000.00 x .03)
Max Offer $42,680.00

MINUS 5%-10% for negotiation room and start your offer from that point = starting offer at $38,412

Hope this helps.

Thanks,
Shah

Is there an electronic version of any of the above available to us? That way I would remember all factors....

I would say Shah801 formulas above are the best to go with. I use the same two.

Lisa,

There is currently a website that I use where you can play around with the numbers.
www.dealcruncher.net

Please note: I use this in conjunction (haven't used that word in a while) with www.totalviewrealestate.com to come up with an estimated ARV.

BUT... I'm really looking forward to the new Deal Analyzer Tool Dean will be revealing in the FREE Training webcasts that are coming this week.

Thanks.

Have you refined your offer formula over the years? or does a simple one hold in most circumstances?

It's been a while, but earlier you asked which of the following formulas works best:

1: Asking price x .75 - repairs - wholesale fee

2: ARV - 15% - repairs - investor's profit - wholesale fee

3: ARV x .75 - repairs - wholesale fee

What has been your experience. Which works best? or have you customized the formulas?

Thanks,

Some sample offer formulas was just what I was looking for.

Thanks for the heads up on the dealcruncher website.

Thanks

The only thing I would add is if you are a wholesaler as a part of qualifying an investor/buyer you should try to find out one of two things from your buyer:

1. at what % of the arv do they need the property at.
2. how much minimum profit do they need to do a deal.

If you know one of those two things you CAN alter the formula you use to match the investor.

As an example if I had an investor who told me he needed a property at 75% of the arv before rehab I could alter the formula for an assignment of contract that Shah listed above as follows:

Birddog/Assignment of Contract:

1. ARV $100,000

2. 25% off of ARV (25% = 15% of closing cost, holding cost and realtor fees the other 10% is the investors profit) $75,000.00

3. Repairs $15,000.00
Investor Pays… $60,000.00

4. Your Profit $2,000.00-$5,000.00
Max Offer $55,000-$58,000

Hope that helps.