How high can I go?

Question

Luc Boiron · Answer

Usually for flips you can offer 65-70% of the ARV less repair costs.

So take 65-70% of the ARV. That leaves you with $149,500 to 171,500. Subtract reno costs, and you are at $146,500 - 168,500.

Typically, if you can pay your reno and have 30-35% of the ARV left, even with all costs you have room for a sizeable profit.

Just make sure your assumptions are correct. If it can sell for $245,000 with only $3,000 in renovations needed to get it there, why is it only listed at $142,000?

Good luck!

Amy Ranae · Answer

Thanks for all of the feedback everyone! Since I was planning to purchase w/ hard money I was trying to keep my acquisition plus rehab as close to 70% of the ARV (230k on the shy side) and didn't get it. Although it's still contingent on inspection so maybe the deal they took will fall through.

In any case I've made two more offers since. One is countering me up WAY too high (my initial bid 175k, they countered to 210K (listed at 245k) I came up to 190k but I really cant go higher than that.) I think this one needs like 50k in rehab and is probably 370k ARV. They are stuck at 210k, it's a HUD, so I doubt they will come down further for me to make it work. Also, my lender pointed out that the holding costs on this one would be obscene (3k/mo interest only!!!) so I'd have to really rush through the flip.

I have another I'm trying to offer on now that I would keep as a rental, listed at 210k, probably worth 235k as it sits, I'm offering 150k to see how it goes but I would probably pay 175k for it. I'm thinking of a 20% down conv on this one just because I would hold it but that also pretty much uses up all of my current cash (that I feel comfortable playing with!) so I feel a little nervous about that. Also, it's a fannie mae and I can't get logged into my homepath account and their customer service is TERRIBLE! hahah. Maybe it's a sign ;)

Other NEWS! I might have a financial partner! Working out details but this could be a really nice way for me to get the first one under my belt and open some more doors for me! Thanks again for all of your support!

Gary Montgomery · Answer

You should double check your rehab costs. The sales price and the ARV might suggest there's more issues under the surface. Sounds like an amazing deal though! Good luck.

Jay Barndt · Answer

Working with the 230k base,  subtract full price, 142k, and 3k as u stated "considering that being unknown on a flip"  gives you a nice 84500 buffer if it pulls 230k  so even if you end up at their number or higher in the rehab, it would still cash out nicely considering, final value, agent listing, market at the time, buyer offers i would bounce up to 130k with my next offer but that's me, 5-10% below is what most people start offering and work up from there in 2-5k increments. hope that helps a little, best of luck

Jay,

Jonathan Towell · Answer

I would think you offer price, plus your estimated repair budget should be well below the estimated value. 20% below? I'm not sure because I've never done a flip, but if doing this to buy and hold, I'd want to have at least 20% equity in the deal when all is said and done.

1. Your repair estimate could be wrong. You need margin for error.

2. If your cost plus repairs, holding costs, and closing costs all end up equalling the value of the house, then you might as well have just paid retail value for regular fixed up property. Why spend all the time, effort, and risk when you could have just bought something for what it is worth?

John P. · Answer

They all sound like potentially good deals.  Good luck!

Steve Vaughan · Answer

Sounds like one of those 'auction-like' listings.  They fully expected the price to be bid up.

Our goal isn't to get a certain % below the asking price, but to get a $ or % below market value.  Know the difference in your market.  Don't be afraid to offer full asking or more even, on a deal at your ratio to actual value.

This listing agent probably does their listings this way a lot.  As you search the MLS (if it's even worth doing that it in your area) you'll see agent trends in how they do things.  Good luck and way to be out there submitting offers @Amy Ranae!

Cedric Moore · Answer

@Amy Ranae interested to see how this deal goes! Keep BP posted!

Ingrid J. · Answer

@Amy Ranae There are many ways to calc one's limit.I would go with J Scotts method by estimating your fixed costs (including holding costs), your repair costs and your desired profit. Add them together and deduct them from the listing price to see how high your maximum offer can be.

Best of luck!

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