All Forum Posts by: Account Closed

In my research I've come across several different formulas people use to determine if a deal is worth the risk. The 70% rule [i]seems to be the most used and discussed (?).

While at a workshop recently I met someone who uses this formula:

Figure out ARV.

Deduct 10% of ARV for rehab costs.

Deduct 8% of ARV for all closing costs (including hard money).

Deduct 15% of ARV, which is your target profit.

You're then left with the purchase price.

Does this look good to anyone? Regardless, I'd love to know what formulas work the best for you.

I am not a "full time" REI yet and am looking for my first deal now. But I purchased my first home about a year ago. I initially was trying to get an FHA loan, but the market here in Los Angeles was too competitive to do so. So I went after a cheaper home and ended up getting a great deal on a serious fixer upper and put 15% down, then did a remodel.

The money came from years of saving. I work freelance in the advertising industry. I don't have any more cash, but with the equity I bought into, I will be taking out a HELOC to seed my rehabbing business.

From what I remember, you'll need proof of steady income, a credit score (above 670?), cash in the bank and 2 years of tax returns.

Might be a little off on this but pretty sure those are the basics.

Karen Margrave Thank you :)

Eric Hettena - Thank you! Tom Kern - And thank you as well! I actually have another question - Let's say I came to you with all the comps and numbers and you decided to do the deal with me. How fast would it take before funds could be distributed to the seller? I know that sometimes sellers get cold feet and speed can be a huge factor in closing a deal.

Very hypothetical scenario: I find a deal where I have the opportunity to purchase a dilapidated home for $260k. Rehab costs are $75k. ARV is $490k.

Let's then say I have around $140k cash sitting around to invest, but don't want to tie up the whole thing in one deal, so I go after a hard money lender for a large portion of the funds. How much of that 140k might a lender might want to see me put into the deal?

I know there are probably tons of considerations to factor in. So I apologize for being so vague.

Something similar happened to me last year. I had leased a new car about a month before my offer was accepted. When the bank pulled my credit, it showed my OLD lease which gave me a low DTI. I kept telling them that I got a new car but they would only look at what showed. Well.. 10 days before closing they pull my credit report again and my new car lease popped up, considerably raising my DTI.
The bank then told me the only way they'd give me the loan is if I put down 15% instead of 10%! (And extra 25k!) I had no choice and did so, which helped in the long run.

When the bank pulled my credit report the 2nd time my credit score dropped a tad, but only 5 points. Not sure why yours dropped a whole 60 points. That's a HUGE drop for a late payment of only $60.00. Most of the companies I have my credit cards with won't report late payments until 60 days of delinquency.

This will probably change the parameters of your loan and interest rate, unfortunately. If you can get a statement that proves you settled your account you might be able to send that to the lender.

I am a member of the Real Estate Investing Club that Jeremy Brandt mentioned and like it a lot. My wife and I went to one last week that we both enjoyed called "Invest Club for Women" - http://www.womensinvestclub.com/Pages/default.aspx

Even though it says "for women" it's very much open to everyone and was very positive and informative.

I think the exterior price is missing?

When I was looking for my first home my father in law was my agent. I put offers on probably 15 different houses before I had one accepted. During the process I began I feel terribly guilty about all the time he was putting into each offer. When I mentioned it, he said... "I love my job and this is what I do. Plus, all I need to do is change a few numbers. It only takes a few minutes."

I understand your agent wanting to make offers he feels are reasonable and lucrative, but it doesn't take 3 hours to do so.

J Scott - Amazing info. Thank you!