HELP on determining a purchase price

If you are planning on wholesaling here are some numbers. Always figure your offer from your buyers perspective.

If the ARV is actually $138,016
I would subtract 10% for commissions, closing costs, utilities, taxes, insurance.
So that is $13,801
Repairs of $10,000 (if that is an accurate number)
Your profit of $5,000
Your buyers profit of $20,000
Equals a $89,000 max offer.

If you are going to fix/flip yourself the numbers would be the same only you could add $5000 to your offer price.(no fee for yourself) Max offer $94,000. You would make $20,000 on the fix/flip minus any money costs.

If you use the old 65% of ARV minus repairs your offer would be $79,700. You would not get an accepted offer. They owe $89,000!

If you want it for a rental or for your self then you can pay more depending on what market rents are in the area or how much equity you want in your own home.

One piece of advise. NEVER "adjust" your numbers to "fit" anything. The numbers are the numbers, either they work or move on to the next deal.

You are taking action and looking at a deal! This is how you learn this business. So what ever happens this will be a great learning experience for you.

Good Luck!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Why do I subtract the buyers profit?

If you don't consider the buyers profit you will pay $20,000 to much. Look at the numbers and think about this. If you can't figure this out, REI is not for you. This of course if only if you are wholesaling. Remember, when you wholesale you must evaluate the deal from your buyers perspective and offer accordingly.
If you are buying for yourself or selling to a landlord your numbers can be little different.

Also, you should fill out your bio.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Your local market, and how or if it's shifting up as Dean & Matt have talked about. How would you adjust to a uphill market?

Excuse me for asking a honest question but according to Dean's book "Profit from Real Estate Now", it does not state anywhere under "Making Your Offer" to adjust your offer minus the buyers profit.

That was a statement, not a question. Maybe what you read about was buying a property for YOURSELF and doing the fix/flip yourself or the buy and hold yourself. If you are WHOLESALING, ANY formula you use MUST include the buyers costs and his profit in your offer.

Let me give you an example and remember, this only applies if you are wholesaling the house.

House has an ARV of $150,000 and it needs $20,000 rehab/remodel. You want to make $5,000 and your buyer wants to make $25,000. If you make the offer WITHOUT figuring in your buyers profit you would offer around $105,000. How in the world could you sell that to your buyer? There is only $5000 mark up (your fee)He would make NO money. Now if you included his profit in the offer you would offer $80,000. You would then wholesale it for $85,000 to your buyer, make the $5,000 and your buyer would fix it up, sell it and make his $25,000.

Any of Dean's formula's that he uses for wholesaling INCLUDE the buyers profit within the formula. So read carefully. Also remember, formula percentages that work in Detroit WILL NOT work in L.A. You have to know the local market.

Good Luck and hope this helps,

Michael Mangham
Mentoring/Team Building Nationwide
MD home Acquisitions LLC

Thank you, the light just came on.

Hang in there David, I'm new to the game as well. I'm more of a see something in real life then read about it for me to understand. I know that making offers is nerve racking, but once we get a deal or two under our belts it'll come more naturally. Best of luck on your deal.