Realistic ARV Margins in Austin, Tx.

[Joseph Baldini]

I reached out to a loan broker last week in order to create a mutually beneficial cross referencing relationship here in Austin, Tx. I work with an acquisitions firm here in the local area specializing in finding off market distressed property for the behalf of investors who would like to fix and flip or add to their buy and hold portfolio.

I asked if she had people who need projects, and to feel free to send them my way. This could be a great opportunity to subsequently create some business for one another. I can supply the projects if she could supply the financial means to allow her investors to get it done.

My firm supplies property at 80% of ARV minus the cost of rehab repairs. Our fee is already built into the cash price.

At which point she responded: Thank you for reaching out, Joseph, I get these types of emails frequently from agents. I have clients looking for real deals (70% ARV with realistic ARVs and budgets) so you are welcome to send me those deals.

I responded, That's fair. However, please take a moment to consider the fast pace and demand in the Austin market. Not to mention the high price point and low days on market. 70% is a great rule of thumb for the Mid West or some more rural areas, but in Austin that's just not a realistic number. It's just about the hottest market in the country and a place where people simply want to be. If your clients are demanding 65 or 70% deals, Austin is just not the market for them. Also, take into consideration that our fee is built into our price, it's not added on after the fact. That's a big deal in factoring the final costs after all is said and done. Honestly, if you come across someone who has a 70% deal with fees built in to the price, send them my way. My guys would snatch that up in a heartbeat.

I'd love to hear some different takes on this by some others form all over the different areas of the Real Estate and Investing World.