determining offer price

[Olivia Story]

I am looking at my first rehab flip property and am having a hard time finding a good offer price. When researching how to get my offer price, I see several methods to get there. The MPP (Max Purchase Price) suggested in J. Scott's book, The Book on Flipping House suggests:

MPP=Sales Price-Fixed Costs-Profit-Rehab Costs

Here is my problem. If the fixed costs include hard money lender fees and interest, how do I know the what to use for my calculations if I don't know the loan amount (as I'm trying to find out what to offer)? Do I just guess? Use the listing price? Same goes for closing costs. I don't have the loan amount yet so I'm not sure where to get that number.

The other method is the 70% rule. As I understand it, you offer 70% of the ARV. Is that right? I have tried both of these methods and they each result in different numbers for offer price.

I know the septic has major issues and there are clouds on title, but these still need some research. Here are the numbers I have come up with:

ARV- $286,587.00

Current List Price -$95,000.00

70% rule- $200,610.90

Fixed costs:

Purchase costs

Closing $2,850.00

Hard Money lender fees $4,750.00 (I estimated 5% of the current list price)

Hard Money Lender interest $14,250.00 (I estimated 15% of the current list price)

Holding costs

mortgage payments $1,500.00

property taxes $1,000.00

Utilities $1,000.00

Insurance $200.00

Selling costs

Commissions $7,737.85

Closing costs $7,737.85

Home warranty $300.00

ARV- $286,587.00

Fixed Costs-$41,325.70

Profit- $20,000.00

Rehab costs -$70,000.00

MPP- $136,602.60

So the 70% rule says $200,610, and MPP says $136,602. The list price is $95,000.

Please, I need help! Any advice or suggestions would be greatly appreciated.

[Bryan L.]

@Olivia Story - First, my advice to you would be to run away from this potential deal. Especially as a newbie. Title issues and $70,000 in rehab costs and having to rely on hard-money to do this - that's a hell of a lot of risk for $20,000 profit. Unless you have experience as a builder or contractor, run from this deal. I've been rehabbing house for more than 10 years, and I would run from this one. There's better deals out there. Just my 2-cents.