Do Your Own Numbers!!!

[Donnell Durden]

So Im currently listening to episode #211 and Brandon keeps saying "Do your own numbers"

I'm a newb but I like to think I'm kinda smart so below I list all the number I can think to "do" in order to

calculate a deal. help me out if I miss anything.

Cost of home

Available cash to put down

Amount borrowed

Mortgage payment

Mortgage interest (the cost of the loan)

Insurance

Taxes

Cap ex (monthly % saved for big ticket items)

After repair value (arv)

Appraisal amount?

Near by homes costs?

Rental income

Misc income

To my understanding you simply add all of these numbers together against each other.

If you can manage to get the property at or below 70% of its value and the expenses are lower than the income then you are in good shape.

That coupled with how much of your own cash is involved to know how much you'll need to extend yourself.

What am I missing here? This seems too easy 

[Dean I.]

The math is easy. Knowing how and where to get the numbers can be a little difficult when starting out though.

70% rule is just a good rule of thumb though. It is a good starting place to determine if a house is even worth looking at. I personally had to adjust my quick calculations to 64% rather than 70% because of the profit margin that I am shooting for and the additional expenses that are more common in my area.

Generally speaking, you need to know these numbers.

Profit Margin: How much do you want to make.

ARV: Find a real estate agent that can do comps for you

Purchase Price: Will not always be the same as the listing price. In fact, it will usually be higher or lower.

Renovation costs: Unless you are a contractor or have extensive experience in this area, find a few contractors to get you estimates on renovation costs. Do not try and do this yourself if you don't have the experience necessary to make a good and fairly accurate estimate. I suggest over estimating a little bit on this one.

Closing Costs at Purchase: This can often times be dumbed down to a percentage of the purchase price as a general rule of thumb.

Closing Costs at Sale: This can often times be dumbed down to a percentage of the sales price as a general rule of thumb.

Real Estate Commission: Percentage based on sales price.

Financing Fees: This includes any fees that are paid to the lender at purchase. This may also includes any additional fees for services that the lender requires like appraisals, inspections, doc fees, etc.

Holding Costs: These are your utilities, loan payments, yard maintenance, etc. Things that you will be paying monthly while you hold the property in your name. Find out how long it takes on average from close (purchase) to close (sale) in you area and then add some additional time as a contingency. Keep in mind that some parts of the year are slower than others.

Math basically goes like this

ARV - Purchase Price - Renovations - Closing Costs - Commission - Holding Costs - Financing fees = Profit.

If target profit does not match the actual profit when purchased at list price, then adjust the purchase (offer) price up or down.

Also, BP calculators are great to use too.