Evaluating A Real Estate Deal That Would LOSE MONEY!

All Potential Deals Should Be Reviewed

I get a lot of deals sent to me AND I LOVE evaluating a good deal!

Often times these deals just don't work and you have to be able to trust the numbers.

Here is a quick review of a property I received today, which again, I appreciate the awesome relationship I am building with this wholesaler.

By no means want this post to discourage anyone. In fact just the opposite! Any wholesaler who is actually taking action is a good relationship in my book!

Let's Dive Into The Numbers

The first information you will receive is Price, ARV and Reno cost.

Usually the rest of these numbers are forgotten by the realtor or wholesaler and I want to make sure anyone who has learned from me is sticking to the numbers:

Acquisition $288k
Closing costs $10k
Lender costs $18k
Renovations $30k
Realtor Commissions $17k

Total cost $363k
Arv $360k
Net Loss -$3k

Breaking Down The numbers

That's a really tight margin for the amount of capital into the project. An investor would LOSE money on this one assuming everything goes well!

If anything goes wrong this could be a massive loss.

The 70% Rule

Most investors follow the 70% rule with rehabs.

If you haven't heard If it (which I'm sure you have)

It just means that on a $350k ARV property the investor should stand to profit between $80k-115k

So the right investment offer for this property is: $188k

Always ask your contact if they can go back to the seller and see about getting the price closer to YOUR number, and let them know that would make this deal much more attractive.

Be aggressive, take action and stick to the numbers