| |
| |
|
Real Estate |
|
|
|
Articles and Information about Real EstateNetFinancial | Institutions | LoansColleges and Universities | Search Engines How Much Should I Pay For This House?
We probably answer this question for someone a couple times every week. The problem is that they don't have a good formula for determining the most they can pay and still make a profit - so they're scared to make any offer. Here's what we use for single family homes: The (MAO) Maximum Allowable Offer is calculated by first determining what the house will be worth after renovation - the ARV (After Repaired Value); less the rehab dollars required; less the Buy/Sell/Hold (B/S/H) costs; less profit margins. MAO = ARV - Rehab - B/S/H - Profit So let's break that down a little further. To determine the ARV, study comparable sales data. Comparable sales are those properties which sold in the last 6 months to 1 year, and within ½ to 1 mile from the subject house. But other factors must be considered as well. The more characteristics between the properties that are similar, the more valid the data. Make sure that the house itself is similar in square footage, bedrooms and baths, age, style, and architecture. Don't worry about condition except as it will affect the amount of rehab dollars required. Next, look at the neighborhood and the individual street. Do they look the same? Or is the comparable property on a beautiful street while the subject property is on a street riddled with empty littered lots and boarded up houses? The point is to view the potential investment as your end homeowner occupant will. If they could buy your completed investment on the bad street, or a house on the beautiful street - either for $150,000 - which would they choose? The other house of course. Which means your house is not worth the same - it must sell for less to attract a buyer. Rehab dollars differ from renovator to renovator depending whether they do the work themselves, or use cheap subs, or use an expensive general contractor. The scope of the work should be the same - it is whatever is required to make the investment look like the comparable houses (unless the plan is to sell well under market value). We do not attempt to obtain all of the various contractor bids when we are making offers. All the real deals would be sold before we'd ever have an offer together! Instead we've developed ranges of rehab dollars based on the overall condition of the home. Is it an exact science? No, but neither are the bids - there will always be something missed. So why not work with a guide that is probably 90% accurate and allows for quick offers? Buy/Sell/Hold costs include expenses such as appraisals, attorney fees, title search & title insurance, loan origination fees, debt service, utilities, insurance, taxes, real estate commissions, and closing fees paid on behalf of the end buyer. Again, these costs vary depending on each investor's individual situation. In the Atlanta area, 15% of the ARV seems to be a good average allocation for B/S/H costs. If you are the renovator, calculate your specific B/S/H costs, then utilize that percentage for future offers. Profit margins are the fun part of the equation. How much do you want to make? If you're wholesaling the property, you also want to consider how much you should leave in the deal for the investor buyer to make the deal attractive. That's it. That's how you calculate the most you'll pay for a property. But that's not what you SHOULD pay. It is the maximum you'll pay. It is the deal-breaker. You will not pay one penny over the MAO. Your negotiations should lead you as far below the MAO as possible. The difference in amounts is additional profit in your pocket. What you SHOULD pay is the minimum price below the MAO that the seller will accept. We call this the MIN-O. Have a rich week, Lou FREE! Real Estate Investing Secrets To Earning $100,000 Your 1st Year! -- 11 Overlooked Real Estate Statregies That Will Turn Your Investing Business upside Down And On The Fast Track TO Success...Guranteed! Plus A Bonus Track With A Secret So Successful It Can Double Your Investing Income Overnight! http://www.InvestorSuccessTactics.com
MORE RESOURCES:
Real-Estate - Google News |
|
|
|
RELATED ARTICLES
Selling Houses: Psychological Effects of Landscaping Buyers think they care more about the inside of the house than the landscaping, but in reality, most buyers won't even get out of their car if the front landscaping lacks the promise of great details inside. Therefore, your landscaping needs to arouse buyers' expectations and entice them into viewing the inside of your home. Dont Just GET THE DEED - The Infamous Kitchen Table Closing Q: Hi Lou, I have a property under contract that I want to resell/flip as-is to a rehabber/renovator, but I may have to purchase it quickly and simply record the Quit Claim Deed, without using a closing attorney or waiting for a title exam. I need your advice. OPM - The Art of Leveraging Equity lender, hard money lender, private investor or what ever term one uses can be a great source of funds to do real estate transactions and the question of how to find them comes up often!There are numerous ways to do this, and no two investors are exactly alike, so it's important to be innovative and customize your proposal to the specific "hot buttons" for each funding source.One of the greatest advantages of real estate investing is the power of leveraging other people's money. The Cat in the Attic Strange and unexpected things happen during home inspections. Seldom are they tragic. Young Couple Buys Ranch with Government Money Kirk and Tina Sczepanik had a dream. They wanted a ranch of their own. An Overview of Easements Title insurance is generally associated with insuring a purchaser's or lender's interest in a particular piece of real estate. The right to use an easement is often considered less important than unencumbered title of the insured parcel. Expenses of Home Ownership Hopefully all goes smoothly when you purchase your home. In your anxiousness to become an owner it may not have crossed your mind and no one tells you, your'e not done spending money on this transaction. San Diego Home Evaluation The Southern California city of San Diego has all the attractions of a big city with the tropical feel of the coast. Covering nearly 350 square miles with over 1. Real Estate Investing: America Rents Most people in America rent a personal dwelling!Just think how many families rent a house or an apartment, a duplex or a condo.Yet, nobody prefers renting. Subdividing - But NOT Land! Many people are familiar with the concept of sub-dividing a large piece of property into smaller lots. The same concept can be very profitable in other areas. Lease Options or Rent to Own? Finding a rent-to-own house is one of the many ways someone with bad or no credit can buy a house. You will often find them called names like lease/options, lease with option to buy, lease purchase, lease 2 purchase, rent with option to buy, rent to own, or rent to buy homes. Home Inspections or Home Warranty? Homebuyers are a curious lot. They routinely ask thought-provoking questions. Property Investing Secrets 5 Property Investing Secrets:How To Work With Agents And Get What You WantWhen you're property investing, it is important to know how to connect with real estate agents. Here are some techniques you can use when you are out there pressing the flesh. Peace of Mind for Home Inspections: Choose the Right Inspector! As sure as the spring flows at The Fountain of Youth, home inspecting provides a stream of knowledge to wash away the fears of home buyers. But fear may be replaced by frustration if the wrong inspector is chosen! Some pointers on selecting your next home inspector will go a long way toward making the process a happy one. Home Inspection Checklist - Home Inspectors Although architectural details, wall and floor coverings, modern conveniences and many other factors are important in the buying decision, the focus of this inspection is on the structural/mechanical/electrical condition of the property.The inspection is designed to give the real estate agent or prospective purchaser a system to detect some of the readily accessible major flaws or deficiencies in the significant components and systems of a home. Buying an Unfinished Home Maybe Your Answer For the first time "want-to-be" homeowner, purchasing an unfinished new home maybe just the answer. With mortgage interest rates still at record lows, there has not been a better time to purchase a home in decades. Be A Realtor With Curb Appeal Are you a realtor with curb appeal or are you more of a fixer-upper needful of updating?How you present yourself to colleagues, buyers and sellers, from the very first moment, will influence your sales records as well as the confidence and satisfaction your new clients feel. Even if you're a Realtor in demand, with more listings than hours in a week, you may well find areas that you can polish. For Sale By Owner Listings Selling your home on your own, without a Realtor, is becoming less and less popular. This is surprising, considering that home values have skyrocketed and commissions have risen along with them. Late Mortgage Payments Sabotage PMI Cancellation There's something you should know about PMI!Private mortgage insurance is commonly referred to as PMI. If a buyer makes a down payment of less than 20% of a home's value the lender will insist that a premium for PMI be added to every monthly payment. Home Loans - Identity Theft Protection Could Hurt Home Sales Identity theft has been a hot topic in the news during the last few years. Just a month or so ago, forty million credit card numbers were compromised due to a computer attack on a credit card processor.
|
|
Currency Trading | Investing | Leadership | Negoatiation | Real Estate | Stocks and Mutual Funds | Taxes home | NetFinancial | Institutions | Loans | Colleges and Universities | site map Search Engines | EZmatic | 0pops | GetSonic | TrafficFish | Health |
| © 2006 |
