25-1 Formula And a couple questions

First I would suggest to have a couple of good agents to look at properties with. With more than one agent it will make sure you do not over load one agent.
When calculating rehab there are a couple things you can do. When you look at properties take notes on the rehab that needs to be done and go to Lowes where you can easily cost it out.
Something else you can do is a quick estimates for rehab. Break the rehabs into 3 areas.

light = about $10 per sqft
medium = about $20 per sqft
heavy = about $30 per sqft

This will give you a good starting point but the cost might change slightly depending on your area. As you are costing things out from Lowes or getting estimates from contractors you will get your numbers dialed in.

Great advice from coach Eric !! Also would add that the formula you use to calculate offer I'd depend ant on the strategy you will use or what your buyer needs. Normally you wouldn't inspect the property until it is accepted but just starting out you should look at as many as you can to get experience. Coach Eric's advice on acquiring two or more agents to work with combats the burn out of a- ONE realtor. Also just starting it is wise to get a FEW contractors on your team to use to view the properties and walk you through them giving you estimates AND free education as they explain the repairs and costs per sq ft on each area. Be sure to record or write down EVERYTHING that they advise you on. I like the Dan Sullivan phrase - more is caught than taught- so be sure to CATCH what they say when doing a walk through each property. They will give you an estimate but what they SAY to you when you are physically viewing the property is very valuable training !!

Re reading your question Jeff I see your formula has two profits built in your formula. 1- 20,000 and 2- assignment fee ??
Not exactly sure which formula you are using but as i mentioned above it depends on your strategy. Are you assigning/ wholesaling? Are you fixing and flipping or buying to hold. All formulas would be slightly different
As long as you have all fees including acquiring, holding, closing costs ,your profit , repairs then you can make it work.
Ps: I admire your drive to make it a priority to use what I call the fleep assignment!! Consciously reviewing your assignment in your sleep / dream. This is how you overcome your fears also by visionary or doing an assignment in your sleep !!
Keep up the good work Jeff !!

Hi Jeff - All of the advice above is spot-on.

Allow me to play devil's advocate and give you advice from a different angle. My experience is that one of two methods usually work best. It's up to the individual to determine which method to employ based on your market, etc.

1) Throw it at the wall and see what sticks
2) Shot gun approach

With "throw it at the wall and see what sticks" you take ALL of the guess work out of it and the goal is QUANTITY of offers. This method works best if you're investing outside your home market. For example, I live in South Florida but in 2013 did all of my deals in Indianapolis, IN. In this case I could not see any of the properties and I needed to rely on my realtor to take pictures and my contractor to give a fair rehab estimate. But, before i started wasting everyone's time I would use the MLS list my realtor provided and simply take the asking price X .65 to come at my offer. (NOTE: .65 was what worked in my market after a few trial and error attempts, this number will be slightly different everywhere). Once I had a counter offer I would then research the house a little online and if the numbers made sense, i would then ask my realtor and contractor to stop by. I could make 25 offers in one day using this method and it ensured we always had a full pipeline.

The "shot gun" approach is very different and is based on QUALITY. Once you get to know your market and begin to build your power team with agents, contractors, etc. you will know what houses sell best to what buyers and you can hone and refine your approach. With this approach you make less offers and more of these offers are accepted.

With whatever approach you go with, just remember to TAKE ACTION. Paralysis by over-analysis limits us all, at first. If you're unsure what to do next, the best advice is just make an offer

Good luck and please keep us posted on your progress!!
Kristin

your profit will not be a fixed number; it will vary depending on your deal (your numbers); some wholesalers have made as little as $500 while others have made as much as $100,000... you just want to make sure that you leave enough meat on the bone for your buyer.

If the properties you're considering making an offer are close by I would do a drive by inspection on your own to get an idea of the condition of the property and the neighborhood; that would give you a rough idea of whether you need to estimate the rehab as light, medium, or heavy.
Once you build a relationship with your agent, she/he may just give you the code of the lockboxes to go in the properties on your own, or with your contractor.

This is all amazing advice thank you so much. I will start looking for contractors to add to my team today. I have two agents I personally know that I will give a chance and will look to add another one that I have no connection with just to add too the fish lines.

jbtoggs the formula I used is from 30 days to cash. Basically the .85 covers all the fees. Then he said $20,000 for profit (which would go to the buyer) then I need to account for my fee which would be $5,000 preferably. Then the other fee is rehab. I just got a buyer that signed up from my website and they are looking for fix and hold properties. So the formula for these type of buyers I could just avoid the price x .85 formula since they won't be selling right?

Again thank you everyone plan on seeing a couple properties this week after the new year

Ok everyone,

That is some good info, especially since I will starting very soon on my jouney as a wholesaler. But my thing is with the inspection. Do you as the wholesaler have to come out of pocket for an inspection or are you just guestimating the rehab costs for your formula to work? I have yet to get an answer on this. In other words...
Get the offer accepted
Go see the property
Seller said approximate of rehab costs on phone but you want to be sure or as close as possible*** Do you come out of pocket??

Awaiting more good advice

Bernard... Afghanistan in route to the ATL soon..

Hi Kristen,

I would love to hear how you are able to invest outside of your state. How you got a realtor and contractors to see the property, place your offers and do your inspections. Do you pay for the inspections or estimates? Isn't that money out of pocket, despite the offer being accepted? I will be starting out in Atlanta in a couple months once I get home for good from Afghanistan contracting, but that rehab estimate thing is really nagging me as far as paying or just guesstimating.

Hope to hear from you soon...

Bernard

Sorry Jeff!! I just saw this and realized you asked me another ? This formula IS for your buyer that buys and holds. You just have to change the numbers around for each new buyer. For example ..... Your next buyer may want a $10, ooh profit instead of 20. Also you NEED to do comps of other properties in the area of house you r making offers on. This is why you NEED an investor friendly realtor. Also the INSPECTION does not have to be an ( inspector ). USE a trusted contractor. If you don't have one then it's YOUR JOB to find one through trial n error or get referrals. They will give you free estimates. Keep using and trying UNTIL you find the right one. The key is to make the offers WITH EXIT STRATEGY IN CONTRACT such as the inspection which is by inspector OR CONTRACTOR . Now I know you don't know the EXACT repair until you get it from contractor but the $10,000 in matts formula is just a number to use until he gets one accepted then will verify. Or I am not sure it could have been the # specifically for the one he was offering on BUT the formula is just a formula. ........ You will VERIFY from inspection. Key is to get the offers out and ACCEPTED then VERIFY the numbers. The 85% covers all costs so if they are buying and holding then realtors fee would not cost you so can you see where the numbers change ? But are included in formula ? Don't get overwhelmed buy not understanding it completely. I felt the same way also when reading and studying. You will not understand EVERYTHING so you may feel like giving up ..... DO NOT !!!!!!!!!! Just do your comps, make your offers and have the inspections done. With YOU so you can learn and if the numbers don't work then you have your exit clauses in contract. No worries. If the numbers work then you have a deal !!!!!!!!

Answer is in post above also. You want to have the inspection clause in your contract . Yes you MUST inspect it with an inspector OR contractor. I use a contractor always because they give FREE estimates and I walk through each property with them to build RAPPORT and LEARN everything I can from them. Now you can give them a small fee or only get est from ones that give free estimates MOST contractors that I know give free ones. I was a contractor for 20 yrs and ALWAYS gave free estimates. Esp in slow months but ALWAYS there is ALOT of competition now and EVERYONE seems to have a ladder on their truck and in the contractor game so your job is to find the RIGHT one through the learning process . TRUST your learning journey !!!! Go get um !!!! You are about to gather massive experience !!!!!

Having worked with some contractors over time, I have a concern about bringing in contractors to provide free estimates on a regular ongoing basis. They provide these estimates as a way of building business for themselves. If we continually use them to provide free estimates, but it never turns into any work that they will get paid for, this will quickly begin to feel like a waste of time for them.
Ways to Create a Win/Win:
1) Connect these contractors with your cash buyers so that they could potentially head up another crew for them and double the cash buyer's potential revenue.
2) Only inspect the properties that you place under contract, and pay a fee to have a contractor inspect and bid on the work, plus providing you with pictures of the property that you can use in your marketing piece. I actually found a retired contractor who now calls himself a handyman and likes doing this work for me, for around $100 per property. I also use him for various small jobs on rental properties I own.

I like having people who are anxious to provide services that I ask them to do rather than those who will begrudgingly provide another free estimate because that's what they advertise. If you take good care of the people who work with you, they will be glad to receive your calls.

Thanks Dallin. That answered an important question for me in regards to inspections and when to do them. So would that be after I go physically look at the property myself to decide if the property is potentially a good deal and worth a professional inspection? For instance in 25:1, send the offers out, get at least 1 acceptance, go look at it yourself, lock it up then get a professional estimate/inspection??

Regards,

Bernard

Coach Dallin has some great points !!also Jeff After doing some research on contractors in your area and finding a couple reputable ones, you may initiate a call with them explaining exactly what your intentions are.On the call you can let them know that you have a detailed plan to make offers on multiple properties.You are a local investor that finds,buys,repairs,and passes on or holds for income.This will put a picture of multiple income for them in their mind as you ask them how you could both benefit from working with each other.As a contractor myself that has been in this situation i am happy to hear this information and would say ....hey Jeff how about we both view a couple properties together and see what they look like and develop a strong business relationship.I wouldn't mind giving you a couple free estimates to get you going and see where it brings us.Heck if you get multiple deals and I am your man for the repairs then we could make some magic happen in both our businesses.

As someone who is just looking to get into wholesaling and just finished Deans 30 Days book, I had the exact same questions! So thanks for this info, it does help clear things up.

So the takeaway is don't worry about the rehab cost yet, just judge it by the pictures at first and if you get an offer accepted, just make sure it's in the contract that you can inspect the property first and you can either bail, or readjust the offer perhaps. Sound about right?

Thanks folks, good stuff!