ARV confusion..

thoughts or ideas?

The end buyers I know want their total price to be around 65% of FMV. That's the purchase + rehab + wholesale fee = 65% (or less) of FMV. If it's good cash flow, turn key with renters in place they may be willing to pay more. Just depends on your buyer. Some want turn key, no maintenance. Some want dives that they can get cheap and rehab. Ask your buyers what they need and give it to them!

Some want tons of equity, others want strong ROI... Some want both. Some of my buyers don't care about the equity as long as it's a strong ROI.

Wow just went over my head...still new at this. So if I understood you right then the first part was correct if so super. Now what is the rest you were talking about turn key and such? I have no idea how to find cash flow. I refuse to buy some program online if I don't even know the fundamentals. I would love for someone to PM me the formula to find cash flow. What is turn key with renters in place? I figured with the ARV*.7 they are getting minimum 30% equity for holding costs and profit margins. I think if I can understand turn key I might be able to understand the rest of what you said with turn key, no maintenance (no rehab?). What is dives? is that what I would be offering with the 58% of ARV? Thank you for your support.

Hi
Don't know it all, havn't done a first deal yet but
"This is what I know"(DG)...
"Turn key" only means that there is already a renter in place, or that the house is ready to rent...(no fix up(rehab)needed)...(so therefore it's like starting a car: just jump in and "turn the key" to start making money)hence the phrase "turn key"....
"Cash flow" only means that @ the end of every month, the end buyer is able to put some extra dollars in their pocket after any expenses for the property : example: If the mortgage pmt. is only $500 per month and the end buyer rents it for $700 per month...Then the "cash flow" on that property is $200 per month Because the "cash is flowing" Hence the phrase "cash flow"
Hope this helps
Peace,Love,and $$$ Angie

angelala wrote:

Hi
Don't know it all, havn't done a first deal yet but
"This is what I know"(DG)...
"Turn key" only means that there is already a renter in place, or that the house is ready to rent...(no fix up(rehab)needed)...(so therefore it's like starting a car: just jump in and "turn the key" to start making money)hence the phrase "turn key"....
"Cash flow" only means that @ the end of every month, the end buyer is able to put some extra dollars in their pocket after any expenses for the property : example: If the mortgage pmt. is only $500 per month and the end buyer rents it for $700 per month...Then the "cash flow" on that property is $200 per month Because the "cash is flowing" Hence the phrase "cash flow"
Hope this helps
Peace,Love,and $$$ Angie

Thank you for answering those two. I didn't know the turn key but I guess maybe I didn't explain the cash flow part. I understand what cash flow is just not how to calculate it. Like as you put say a mortgage how would I know how much their mortgage would be and do I need to find out the going rate of rent for that area with something like rentometor.com?

Let's put our mind where the buyer is coming from. I want to know how quickly I'm going to recoup my investment. Let's say you get me a deal that costs me 100k. I want to get 10% ROI (return on investment) annually. So I need that house to pay me 10k after all other bills every year.

So I need to know my taxes, insurance, utilities (that I pay), lawn care, any HOA fees (not common), maintenance, etc.
If my taxes and insurance total 5k annually and I pay no utilities then I can take the gross rents per year and subtract the 5k from that. So if it rents for $1300 a month I'll get $15,600 gross rents (if I have a tenant for all 12 months). Now subtract the 5k taxes and insurance, that leaves me $10,600 cash flow and a 10% ROI! (assuming no repairs, tenant mows their own yard and shovels their own drive, etc.

This is the cash flow game. We take all the stuff that your buyer will have to pay every year and subtract that from gross rents. On a single family home I want 15% ROI, so I have to buy cheap! If I buy at 30,000 and rent for $550/m and I only pay $2,000 annually for taxes and insurance (tenant pays the rest) then I have $6600 gross rents minus $2,000 t&i, leaving me with $4600 annual cash flow ($380/m) and a 15% ROI! These aren't rare numbers. On a small single family house you want to make sure your buyer is getting at least $150/m cash flow in a good area that needs very little upkeep.

Yes, turn key means "ready to go". No deferred maintence. Nothing will irritate a buyer more than hearing "it doesn't need anything" from a seller only to find $10,000 worth of needed updating and maintence. This was the case recently for me. A lady is trying to sell her home. She said it was ready to go, didn't need anything but a bit of cleaning. I drove by and saw broken windows, sagging siding, and plywood where the garage door should have been. She's not getting anywhere near her asking price. This is a good thing if you are the one buying though, just start deducting your rehab and then make the offer. She won't be able to sell it to a retail buyer in that condition!

Let me know if this is helpful, I'm tired so I hope it makes sense.

Thank you Invest_Midwest. I have had no one explain it in that much depth for me before I totally get it now. I copy & pasted it into a file for myself if I ever forget it ^_^. I believe my only question is in the mortgage if you didn't pay cash for the property. I would assume any one buying hold/rent would use a lenders money in one way or another even if they bought it cash they would refinance it to get their money out and pull the equity structured in the deal to do more investing with while having it rented for positive cash flow.

Is it true if you do some light rehab work you can even get more valuable equity to pull out after a new appraisal?

At 50% and you will sell them all day long.