Formula To Calculate Max Offer

Comments(15)

• 
  mattfish1112th August, 2004

  My rehab formula is pretty good and it works for the investors that I deal with...
  
  ARV x 65% - rehab costs = OFFER
  
  For example if you have a house that will be worth $250,000 after its repaired, and it will need $20,000 in rehab it goes:
  
  $250,000 x 65% (=$162,500) - $20,000 = $142,500 OFFER...
  
  Good Luck!
  [addsig]

• 
  jmart222112th August, 2004

  MK,
  
  Thanks for your reply!

• 
  jmart222112th August, 2004

  MK,
  
  I meant to ask is this your MAX offer?

• 
  mattfish1112th August, 2004

  This isn't necessarily my max offer.... You have to figure in holding costs - how long will the property stay on the market, etc. But pretty much if you stick around this number, you should be doing well for yourself!
  
  Good Luck!
  [addsig]

• 
  jam20012th August, 2004

  (FMV/ARV*.65)-Profit-Acquisition/holding costs-Rehab costs=MAO
  
  Roughly, anways...

• 
  jmart222112th August, 2004

  Everyone thanks for the input.
  
  jm

• 
  Bruce13th August, 2004

  Hey,
  
  You can use whatever numbers you want, but I think 65% is a little low. The lower the percentage, the more money you stand to make, but you will have a lot less offers accepted.
  
  ARV x 75% -costs=Offer is what I use.

• 
  shakyamunni2413th August, 2004

  I am trying to make sense of the formula but do not know what the "65%" or "75%" stand for in this formula?
  thanks for your help!

• 
  arhines13th August, 2004

  In the formula:
  
  ARV x 65% - rehab costs = OFFER
  
  Take the 'After Repaired Value' (ARV) multiply it by .65 and subtract the costs of repair. This is your maximum offer to insure profitability.
  
  Good luck. www.prettyuglyhomes.com

• 
  jmart222113th August, 2004

  What I don't understand is how can you calculate in Acquisition/holding costs when you don't know how long its going take you to sell property of what your mortgage is going to be? Do you estimate this figure for example 3 or months holding time?
  
  Thanx,
  jm

• 
  jam20013th August, 2004

  Yeah, Bruce you're right about 65% being low. And probably, the 75% is closer to reality...
  
  Jmart, figure on 6 months of holding costs. That way you know you got it covered if it takes longer than you think, and it almost always does. Also, take your rehab costs and add 1/3, 'cause they ALWAYS cost more than you planned... lol

• 
  jmart222113th August, 2004

  If you use 6 months holding costs as a basis what figure are you using? I'm assuming this is 6 months of mortgage payments. But if you don't have a mortgage yet how is this calculated?

• 
  jeff1200213th August, 2004

  Mortgage payments, Property Taxes,
  lawn service if there is a lawn to maintain. Do you intend to have the utilities on? All of these things could be considered holding costs.
  Jeff

• 
  jmart222113th August, 2004

  Everyone thanks for your remarks!

• 
  AndrewKT13th August, 2004

  Quote:On 2004-08-13 09:58, jmart2221 wrote:
  If you use 6 months holding costs as a basis what figure are you using? I'm assuming this is 6 months of mortgage payments. But if you don't have a mortgage yet how is this calculated?
  
  
  Figure out about what the loan amount will be and then search for mortgage estimator or loan estimator on your favorite search engine. Take that value and add 30-40 percent for the extra stuff that gets tacked on. eg: my principal & interest, 326. my payment, 440