OfflineHi guys, I'm rereading 30 days to real estate cash for the last time before I take some action, and I'm trying to create a cheat sheet.
On page 83 and 84 in 30 Days to Real Estate Cash, it talks about the difference between Buy/Fix/Flip investors and Rental Investors. For Rental Investors, it says that the typical 6% RE commissions and holding and closing costs on the back end wouldn't be applicable, which makes sense, because they're not selling it and paying the additional 3%.
My question is this: For Rental Investors do we calculate our offer differently instead of using the formula (multiply the "actual value" by .85) as our initial percentage reduction before subtracting, Rehab, Investor Profit, Assignment Fee, and Negotiation Barrier, or does our offer formula stay the same with all types of investors?
For example, for our initial percentage reduction, since the 3% back-end isn't currently applicable, would we multiply change our formula to something like, (multiply the "actual value" by .88)?
I apologize if this is answered somewhere clearly. I'm sure it is, but I've looked for it and can't seem to get a solid answer.
Thank you for your understanding,
JC Atom
I agree I would like clarification as well
Watch your thoughts, for they become words.
Watch your words, for they become actions.
Watch your actions, for they become habits.
Watch your habits, for they become character.
Watch your character, for it becomes your destiny.
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Our Heart's Desire must be nurtured by our mind,to give birth to common sense, that will enable us to seek out the path less traveled, with the greatest Personal Growth. -J.R.-
ok so here is what i do i just offer 70% of asking price(i have had success with that) & that pretty much covers rehab & all the costs so I dont need to calculate, however, once i get the prop under contract or countered etc I pull comps & analyze the deal haves someone go see it, & THEN I calculate the formula & I do ARV minus 10% transactional costs(6% commish 3% closing costs etc) minus the rehab & minus the wholesale fee i want & wala I have my max offer amount.
Soo fr there I double check my offer to make sure it is a low enough offer if im good awesome i go forward IF NOT then i go back & offer a lower amount ask for a price reduction etc if they give it great if not then i move on. NOW the only thing that changes when you do that formula when your offers gets accepted/countered IS that when you calculate your max offer amount you dont minus 10% transactional costs.
You just take the ARV & minus the rehab & your wholesale fee & that's it because the buy n hold buyer is just buying the prop to fix & rent out so they are not going to resell the prop hence no more realtor 6% commish & no more closing costs-you follow.
No in regards to your 83% of asking price or 85% i cant remember, but i would prob start if i were you at about 65% or at least 70% because you are not going to have much margin at that higher % you will offer I know because I did that & that happened. Live & learn, like they say if you are not embarrassed by your offers, then you offered too much. Hope this helps I hope I explained myself.
Tony
Go faster do more! GFDM!
Thanks so much Tony.....
I am renewing my license (realtor's license since I want access to the MLS ) let's see how that goes.....
But I think my strategy is emerging ------>Reo's <-----
You had any experience with those?
Soo fr there I double check my offer to make sure it is a low enough offer if im good awesome i go forward IF NOT then i go back & offer a lower amount ask for a price reduction etc if they give it great if not then i move on. NOW the only thing that changes when you do that formula when your offers gets accepted/countered IS that when you calculate your max offer amount you dont minus 10% transactional costs.
You just take the ARV & minus the rehab & your wholesale fee & that's it because the buy n hold buyer is just buying the prop to fix & rent out so they are not going to resell the prop hence no more realtor 6% commish & no more closing costs-you follow.
No in regards to your 83% of asking price or 85% i cant remember, but i would prob start if i were you at about 65% or at least 70% because you are not going to have much margin at that higher % you will offer I know because I did that & that happened. Live & learn, like they say if you are not embarrassed by your offers, then you offered too much. Hope this helps I hope I explained myself.
Watch your thoughts, for they become words.
Watch your words, for they become actions.
Watch your actions, for they become habits.
Watch your habits, for they become character.
Watch your character, for it becomes your destiny.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Our Heart's Desire must be nurtured by our mind,to give birth to common sense, that will enable us to seek out the path less traveled, with the greatest Personal Growth. -J.R.-
I figure my offer the same way no matter who my end buyer is. ARV x .70 - repairs - my fee = max offer.
This will give you several options:
1) Larger audience to market to (buy/hold or flippers)
2) Sell faster to a buy/hold because such a good deal (ROI)
3) Could go a little higher on your fee if you are targeting only buy/hold
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
Apologies for the late reply, friend! After a few days, I didn't think I was going to get a reply, so I just wen't out and started getting my signs, cards, making cash buyer list (takes forever with mls lag), etc.
I appreciate your response, fella. It certainly did help a lot. I'll certainly start off by following that model and see where it takes me.
Again, sorry for being late on the reply. I'll be more diligent in the future.
Thanks again,
JC
Thank you for your response, Karen. I sincerely appreciate it. Apologies for being late on the reply. As I mentioned to Tony, after a few days, I didn't expect a reply. This is my first post, so I thought it might just be missed. I will certainly be more diligent in the future in regards to my posts. My rudeness wasn't intentional.
That formula seems simple enough for me to grasp.
My only question now is this: At what point do you calculate your repair costs and how do you go about that?
I would assume after you've receive an accepted contract, you get a contractor on your power-team to give your an estimate. Is that how you're going about it, or do have some sort of "offer buffer" or other technique that protects the profit margin on the property?
Thank you again, Karen,
JC Atom
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