Percentage of ARV minus Rehab Costs... Am I missing something?

Question

We are "rookies" when it comes to Wholesaling, but have done almost 50 in-house rehabs. I have a couple Investors stating they want properties that are "60% of ARV minus Rehab Costs". We are extremely inclusive of expenses within our pro-forma, so our Rehab Estimate includes all Carrying Costs as well. I want to be sure we are being compared "apples to apples" against our competitors deals, so I thought I would ask if this is a standard practice out there.

Am I missing something?

Jeff S. · Answer

Sorry Dustin Poole , I thought we were discussing ARV percentages.

Without going through the specific numbers, your format is outstanding and head and shoulders above all the “What are you waiting for? You gotta get in on this one” crap I get in my email each day.  I know you know what I'm talking about. Most of the time I’m sent the price, ARV, and rehab cost with no substantiation.

You present a summary up front, justify the value through comps (which I assume are relevant and verifiable), and have an expense breakdown.  I would add a photo of the house and perhaps a map showing the home and relative location of the comps.  I usually like to see the actual MLS listing, thought I see you copied parts of it.

I also see you present numbers to the nearest dollar.  Accuracy like this begs the question where did you get these, or how were they calculated, since they’re clearly not estimates.  No need to answer here, but if it were me, I would ask you to explain.

My other questions would be where did you get the rehab costs and how do you know they’re accurate?  Same for your finance terms.  (Again, don't answer.)

I’m really just being picky here.  Your presentation is exceptionally professional, comprehensive, and answers 99% of the questions I would normally ask.  Have you used it yet?  How has it worked for you?

Good job.

Jeff

Carlos Flores · Answer

I was thinking about the repairs when I asked about a full report for non-MLS deals.  According to your report, your first repair estimate is a guess.

"Repairs are an estimate calculated from: Gross SqFt, Year Built, Foundation Type, Stories Count, Bathroom Count, and 14 other key indicators downloaded from the MLS database. Additionally, when the formulas successfully query key phrases like “Cash Only” or "Not Insurable" within the listing text, repairs are automatically increased by variables linked to size and age."

But it is probably a moot point since you would have actually looked at the property if it is a non-MLS deal.

Tod R. · Answer

Justin, I like the format.  As to your question about apples to apples comparison to your competitors, maybe do a subtotal of ARV-ERC and show a purchase price %.  Then deduct your other costs to get to the bottom line.  This would allow investors to see the numbers as other wholesalers would show, yet makes it obvious you've included all costs.

Dustin Poole · Answer

No, the subject does not have to be in the MLS. The important part is being able to pull comps from around the property.

Carlos Flores · Answer

I like the report and the layout.  I assume the subject must be in MLS for you to fully evaluate it if you don't have all the data points?

Dustin Poole · Answer

I shared the Cotillion Report for you guys to check out. Let me know your thoughts on the report itself, not the property.

Keith Lutz · Answer

Same here, had to request access, but nothing yet!  Appreciate it!

Carlos Flores · Answer

Dustin Poole I can't access either link.  Says I have to request access.  Which I did.

Chris Feltus · Answer

Dustin Poole Thanks for sharing your format with us. Good work.

Jeff S Thanks for your valued insight provided throughout this thread. The pdf Dustin provided is thorough and analytical, but he for obvious reasons be would be unable to post that much detail when he emails it out.

With that being said, how would you suggest summarizing some of the key information in a professional manner for the body of the email without coming across with  the "What are you waiting for You gotta get in on this one" vibe? If he only stated in the body of the email ARV, PP, ERC and a few other details, that might not be enough to encourage a potential investor to open it and take a look at his pdf. What would you look for in the body of the email?

Would be curious as to how you do this yourself as well Dustin.

Thanks in advance for your insight.

Dustin Poole · Answer

This is what we provide our Buyers...

https://docs.google.com/open?id=0B2Lv_eqzK4FEVDNfczczb2xHZ1U

Percentage of ARV minus Rehab Costs... Am I missing something?

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