Question on formula

[Brandon B.]

So it seems the standard formula to determine the appropriate best offer price is ARV x 70% - rehab costs - fee. Now this all makes sense and if you can get properties that fit into this formula you will definitely make money. But I think you can still make great money stretching these numbers quite a bit.

My GF is a rehabber/agent and has been doing it for years and I've analyzed some of her best properties and she usually gets them for 75% ARV. Recent example she bought a house for $338k with an ARV of $450k, needs about $40k in rehab. She's still gonna make good money on the house even though it's WAY out of the parameters of the formula. I would need to buy this same house for $265k for it to be a good wholesale deal following the industry standard formula. Now she is an agent so is gonna save $13k in commissions selling it and has the cash in the bank so there is no hard money interest. Maybe that accounts for the difference?

So does this mean there are wholesale deals out there that people are letting go because they don't fit the formula exactly? How often are you wholesalers out there buying stuff at 70% of ARV regardless of rehab costs and still making money?

[Duke Marquiss]

On higher priced homes you can stretch the numbers quite a bit and still get a good paycheck.  Just remember that Murphy's law always comes in to effect.  I have purchased upper end homes as high as 80% less the rehab costs and due to the rising values and execellent condition that we put out the back end the homes will sell quicker than a similar comp that is still being lived in  or has not been cleaned up.  

One of the things that most starters don't do tha I think is most important is to hire professional cleaners at the end.  Make sure the windows are cleaned inside and out and leave the screens washed and secured someplace.  It makes the houwe look bigger and brighter.  

Good luck, you are on the right path and asking the right questions.