What would you offer

[Alex M.]

Market is very very high in my area right now with people fleeing the city. I have a house i am in a deal with atm. After it is fixed up it will be worth around 330k. It will cost me and my team 55k-60k to fix it up. It would cost double or a little more then double that if used contractors, house is in bad shape. What would you be okay offering on this house with this information? What would you want to make?

[Anna Laud]

@Alex M.

Hi Alex! 

When you're saying market is very high with people leaving the city, it's likely there are going to be multiple offers on the table for the seller to basically pick and choose from which I would maybe keep in mind when offering. 

This is important when you offer to know that in these cases, coming in with a lowball might not work in these cases, even if paying cash as there are probably other cash buyers as well. I would base then on a % for my offer accordingly - dependent upon asking of course. 

Usually the golden rule of 'all in' is our 60% - but there are some that will say 70% and it's whatever works best in your market. Now when you're talking about higher price point properties, it can make sense to get closer to if not just beyond that 70% 'all in' mark. 

Doesn't usually make sense to do that on a $100K deal, but $330K is a bit different- at least I know it would be here in Indiana. 

So if ARV is truly at $330K, I would want to be no more than $198K all in on the low end (60%) to $233,100 on the higher end(70%). If you're saying that rehab will be $55K-$60K, combined with closing and holding costs, etc. that should give you a pretty good idea what to offer based on asking price maybe.

If you're very confident in the rehab costs, it might make sense at this price point to go slightly above 70%, but I wouldn't personally go near 80% all in- again, that's Indiana and maybe there are markets in NY where this is commonplace- just seems to really be too tight in margins for  my comfort personally. 

I would want to stick to these margins- maybe feeling better about 70%+ a little 'all in' your case as you indicated that you would be doing the work yourself and have a more clear picture on rehab costs - not the same situation maybe as someone who's less familiar with the costs and not knowing things do come up in almost every rehab that add to your rehab costs. 

Hope that helps!