OfflineI'm trying my best to stick to 30 days to Real Estate cash. I have a couple of potential deals to analyze and come up with maximum offer prices on. In sticking with the formula in the book, you first determine FMV using comps, avg sqft and multiply by the sqft of the house. You then take the FMV and multiply it by .85. After that you should subtract out desired profit and rehab cost.
the problem in running into is I don't know how to determine the rehab cost. The book Doesn't say it anywhere. Does anyone know how I should go about determining this figure? Thanks to all in advance!
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-Steve
I am in a situation, where I need to know- how
to do "The Offer Formula and Rehab Cost"
_Shannen
Steve - That's when you need a contractor. He will determine the estimate amount of rehab. In time after you've seen the similar damages in the future you can start getting an idea of how much a rehab would cost and deduct it yourself.
Shannen - If you are trying to get the formula to Blind Wholesaling Strategy, which is when you use the 25:1 with a realtor is;
FMV (median sales) ex $100,000, times (x) Note: you get this from doing homework
Offer (30% below) ex $30,000, minus (-) Note: you learn this through DG
Your profit ($5k) ex $5,000, minus (-) Note: you set a fair amount
Repair cost ($10k) ex $10,000, minus (-) Note: you get this # from a contractor
Max Allowable offer (MAO) ex $55,000, equals (=) Note: this is what you offer seller.
Now, if you're asking for another type of offer formula, let me know. Since I didn't know which one you were referring to, I just posted this one. There's other formulas depending on the strategy you are trying to do, so be more specific.
Hope this helps though, the two of you.
Thanks. So even if I am just trying to get a rough idea of whether or not a property is a deal, I should bring in a contractor?
-Steve
Most buyers will tell you what they are willing to spend on repairs.
to the above comment you need to ask when you are building your buyers list "how much they are willing to spend on rehabing a property,this gives you a number to work with,still working this through myself.
You can also find cash buyers who are contractors themselves, just make sure you find their criteria and their rehab limit they're willing to spend and just match them up. Yes, you'll spend a few dollars in getting another contractor but you'll just earn that back from the price you set with the other Contractor or Cash buyer who wants to buy it.
If you are wholesaling then you need to know your buyer's budget and a general idea of the needs of the listing.
If you are going to rehab the property yourself and flip it then you will need a more exact determination of the remodeling costs. Bring a contractor friend along with you for the first couple of properties and keep detailed notes about everything he says. Grill him with questions on costs and materials. These notes can be used and applied to future properties. It will not take long to get a basic overview.