How does this offer sound?

As Indiana Joe (and many others) has (have) said multiple times, if you aren't embarrassed by your offer, you've offered too much. Perhaps you should lower your offer amount to something less than the $50k. You can always up your price if needed.

Others have said too that when they low ball an offer, they can try and justify it by saying that the property is competing with foreclosures in the area as well.

Underestimate your value a little (be conservative) and over estimate your rehab costs (you said "at least $35k rehab").

$130k x 0.7 = $91k - $5k (your fee) - $35k (your min rehab cost) = $51k

$130k x 0.85 = $110,500 - 5k (your fee) - 20k (buyer fee) - 35k (rehab) = 50,500

If the property ends up being worth more than 130k, that would be a bonus to the end buyer. If the end buyer blows that 35k budget, it's going to eat into that 20k buyer's fee. So if I had a vote, I'd vote for an offer price of closer to 40-45k.

$140,000.00
$112,000.00 20% investor profit (ROI)
$82,000.00 $30,000.00 repairs
$77,080.00 6% closing
$74,767.60 3% holding
$69,767.60 $5,000.00 assignment fee

Yes, figure your market value UNDER and your rehab costs OVER and figure 30% for the investor.

I'd use 130000 market value and 50000 rehab.
130000x.7-50000=41000-5k fee=36000 MAO (maximum allowable offer)
notice this is a lower number than 130000-50000x.7=56000-5k fee=51000

when it is a property listed on MLS, remember to subtract 6% from the seller's take and adjust for that too. Sometimes it is the smallest amount that stops a deal. People can get caught up on pennies but let dollars go by. This is just basic psych 101.

$36,000??? One of the problems we are having is I was submitting offers like that and none of them were being accepted. So, we were going no where fast. I called the hotline to ask advice and was told to up my offer's because they are not working at all. So, my husband is going to see the property tomorrow to give me a better estimate on the rehab. I'll get the comps from the realtor and then we'll put an offer in. It will probably be $45-$50K.

You already know your numbers...

I would start with Gena's numbers; you can only go up from there, and you already know what your max is.
As my buddy says: 'don't chase the deal', so stick to your max.

Wishing you success,

Valerie

Determine true ARV first. Don't guess. Sold, listed and under contract ACTUAL comps. Know your property. Is there a liquor store near by? The next door neighbor a junk collector? Street full of foreclosures? NO website is truly accurate!! Your ARV number, what it will actually sell for is CRITICAL!

Juan, your formula is good.
$140,000 sales price
20% for investor $28,000
Rehab $30,000
Commission, closing costs 7.5% = $10,500
Holding costs 3% = $4200
That equals $67,300 sell price (assignment amount)
Minus the $5000 assignment fee = $62,300 offer price

Me, I like to keep it simple
I would buy at $140,000 at 65% minus repairs = $61,000 offer price
I would sell (assign) it at $140,000 at 70% Minus repairs = $68,000 sell price. $7000 assignment fee.

ROI on this deal based on property selling at $140,000, Repairs $30,000 =
$140,000
Commissions, closing costs 7.5% = $10,500
Check to investor at closing $129,500
Minus repairs $30,000
Minus holding costs 3% = $4200
Minus Purchase price $68,000
Net profit = $27,300 = 26.7 % ROI.

Remember, all these numbers can vary but this way you cover most unexpected expenses in advance. For example: If the ARV is 5% high and your repair estimate is 5% low you are still covered. If you don't include a margin of error you lose money or your investor won't buy because there is no room for the unexpected.

Michael Mangham
MD Home Acquisitions LLC