rehab puchase price

[joseph44]

Hi Everyone,
Need some help.This is a hypothetical puchase offer I want to know if this what I would offer:Home is in foreclosure realter has a 235,000 price on it,home needs approx 45,000 to bring back to market.Homes in the area vary from 350,000 to 505,000 across the street they are located on canal that
goes to gulf of mexico.This home is opposite these vary 221,000 to 285,000
mostly 2/2 this is a 4b2/2ccpt inground pool large lot here are the numbers.
According to Zillow their estimate $265,000 I took a conservative and started at 240,000 now the asking price is $235,000.From my 240,000 I took 65% of that and came up with $156,000 now from that I must deduct my repair costs say $45,000 now I'm at 111,000 now I must deduct holding costs I'm
using 8mon at $2,000 pr/mo for lender ???? now my marketing through realtor
at 7% 19.950 plus less minnimum profit of $10,000 That gives me an offer price of $65,050.Is this how you figure your offer ????The bank and realtor
will try and put me in a stright jacket.Please need to know if this is right or wrong.The home is 235,000 forcl needs $45,000 Zillow says $265,000 their
estimate.Hope this isn't to long but I would really appreciate the help.Everone have a great wknd!!!!!!!Please if you send me anything go through my e-mail.

[brianb_cobbres]

Hi Everyone,
Need some help.This is a hypothetical puchase offer I want to know if this what I would offer:Home is in foreclosure realter has a 235,000 price on it,home needs approx 45,000 to bring back to market.Homes in the area vary from 350,000 to 505,000 across the street they are located on canal that
goes to gulf of mexico.This home is opposite these vary 221,000 to 285,000
mostly 2/2 this is a 4b2/2ccpt inground pool large lot here are the numbers.
According to Zillow their estimate $265,000 I took a conservative and started at 240,000 now the asking price is $235,000.From my 240,000 I took 65% of that and came up with $156,000 now from that I must deduct my repair costs say $45,000 now I'm at 111,000 now I must deduct holding costs I'm
using 8mon at $2,000 pr/mo for lender ???? now my marketing through realtor
at 7% 19.950 plus less minnimum profit of $10,000 That gives me an offer price of $65,050.Is this how you figure your offer ????The bank and realtor
will try and put me in a stright jacket.Please need to know if this is right or wrong.The home is 235,000 forcl needs $45,000 Zillow says $265,000 their
estimate.Hope this isn't to long but I would really appreciate the help.Everone have a great wknd!!!!!!!Please if you send me anything go through my e-mail.


Let me start by saying that you are correct, they would have you committed.


1. You need to narrow down the FMV/ARV. You are guessing at 240 which is not a good move. Have someone pull comps and compare sqaure footage and come up with a "what you would list it/what you really could sell it for after rehab" value and start from there.

2. Listed at $235,000 and needs $45k worth of work? Somebody is way off. Either the house is worth more than you think and really does need $45k or the realtor is fishing for a higher price. I am guess the real answer is somewhere in the middle. I suspect the actual value to be around that $265 mark with the realtor deducting $30k for repairs. I AM GUESSING.

3. You are deducting the carrying costs twice. They are part of that initial 65% of FMV calculation as are resale costs and other expenses.

4. Why are you going 65% of value? Have you calculated thats where you need to be or is that what your hard money lender is requiring? The most quoted formula is FMV X .7 - repairs. Do you really need that extra 5% because it may help you stay out of that straight jacket.

5. So $265,000 X .7 -$45,000 would be $140,500 max offer. Using your numbers of $240,000 X .65 - $45,000 would be a max offer of $111,000

6. I just read your post again. You are deducting all the expenses twice. Everything is built into that initial 65-70% deduction and that includes your profit. You need to break it out in a spreadsheet and really understand the numbers.

Look at it this way, using my numbers you have $80,000 to pay realtors, carry, and profit. This is where FSBO and buying with cash really come in to play. The less you spend of that $80k means the more for you.

[joseph44]

did this get posted(problems posting que/responces.Thanks

[brianb_cobbres]

Scroll up, there is a response.

[joseph44]

Hello Brian,Thanks for your responce.I read your responce and agree the home is probably fmv at $265,000 I took $240,000 as a conservitive figure.In your post #4 Yes I was using 65% most lenders use this number where did you get the fmv x .7 Are you going in at 70% fmv?The reason I use 65% that is what most hml use so your saying don't use all 65%?Could you please explain paragraph #3 as used in your paragraph #5 are you saying carrying costs are part of the estimate???So if I read you right in Para#5 in the $45,000 est.I would also add carry cost,mortg payment,utilities marketing,or realtor? Brian thank you and have a great wk!!!I'll look forward to your post.

[brianb_cobbres]

Hello Brian,Thanks for your responce.

I read your responce and agree the home is probably fmv at $265,000 I took $240,000 as a conservitive figure.

It is fine to be conservative unless it affects your ability to make a successful bid. You are technically lowering your offer by 15k by taking such a conservative approach. Will it sell at 265K?

In your post #4 Yes I was using 65% most lenders use this number where did you get the fmv x .7 Are you going in at 70% fmv?

You lender will give you up to 65% of the ARV. So go ahead and use that figure but again how will that affect your ability to get the deal. You may have to put cash into the deal to get the house.


The reason I use 65% that is what most hml use so your saying don't use all 65%?

Nope, I have seen Hard Money up to 80% of value.

Could you please explain paragraph #3 as used in your paragraph #5 are you saying carrying costs are part of the estimate???

You are taking %65 off the full value, right? Where does the other 35% of FMV go? It goes to profit, carrying costs, realtors costs, etc.....

So if I read you right in Para#5 in the $45,000 est.I would also add carry cost,mortg payment,utilities marketing,or realtor?

No, they all come out of the difference between your total loan (65% of FMV) and the actual FMV.



Brian thank you and have a great wk!!!I'll look forward to your post.

Lets break this down into smaller chunks. See above

[brianb_cobbres]

Let me break this down using an nice round $100,000 ARV.

Assumptions

ARV = $100,000
Repairs = $20,000

At 65% your max loan is $65,000. You loan needs to be taken into consideration but does not dictate your offer.

That $65,000 is for purchase, rehab, and anything else they roll into the loan. Things like points and such..... Will they let you roll closing costs into the loan, or will you be rolling them in? What are the closing costs, did you get a good faith estimate? What other charges are there from the HML? There are usually draw fees and any other fee they can find a way to charge you.

The other $35,000 is still hanging out there. This is where you deduct carrying costs, resale expenses, and where your profit comes from. Its spreadsheet time, you need to lay it all out there.

Get me the loan details I asked about and I will put it into a spreadsheet that will help you understand. Mainly I need points, closing costs, projected hold time, interest rate.

Sure you could use your original formula and would get very rich in the process if you could get someone to accept your offers.

[joseph44]

Hi Brian,Thanks again for your help I hope these questions don't sound stupid but this is a first for me I've been working other asspects of this business.Where can I get a copy of the spread sheet you talked about.The information you asked for I do not have that's why I asked for a spread sheet. Lastly I understand everything just (1) more question on the carry costs as far as the payments for lender,utilities and etc. can they be rolled into the loan or how do I pay them if these are profit,realtor,and so on.Thanks again Brian as I say no question is a stupid question It's only stupid if you don't ask.Have a great wk!!!!

[brianb_cobbres]

Lastly I understand everything just (1) more question on the carry costs as far as the payments for lender,utilities and etc. can they be rolled into the loan or how do I pay them if these are profit,realtor,and so on.Thanks again Brian as I say no question is a stupid question It's only stupid if you don't ask.Have a great wk!!!!

You may have to pay them with your own money but it depends on your lender. HML does not cover everything.


As for the spreadsheet. The one I use has many thing hardcoded into the formulas so I will need to make another version that allows for more variable input. Not sure when I will get a chance.

[joseph44]

Thanks again Brian for your great help.I'll let you know how things go.Thanks again and have a great wk!!!!