Offer Price Calculation

[Juan Ayala]

What is the price offer calculation when using a hard money lender?

e.g. Baseline Offer=ARV*.70-Repair Cost

What is the formula for adding Hard Money Lenders to this equation?

[Mike Klarman]

So this is what I do:

First thing is I task my agent in the market to find me the comps for the fixed house. Let's say the comps show 200k on the resale. I then multiply 200k by .7 to get 140k. That is my max project cost. I want to stay south of 70% ARV for total project cost. The house we are looking at let's say is asking 97k. Given my max budget of 140k, I can afford 43k in rehab. I then get my contractor in the market to go and tell me what it needs to be equal to its comps. Let's say he says 48k he needs, then I will shave off 5k of the asking price to stay at that 140k. So I'll tell my agent to make an offer for 92k.

For people with experience and/or good credit I can get them 90% of the purchase so you are talking being in for less than 10k on the down payment and up to 18k with lower credit.