Originally posted by @Richard Adjou:
Congrats on the rehab and wholesale, @Jonathan Makovsky , could you share on some of the ways you got to practice analyzing deals? I want to get better at the whole valuation process and not sure the best approach to take to get that practice/experience. My biggest thing is that I don't want to come off as something I am not.
@richard adjou Thanks for the wishes. In my experience, for flipping houses there are four numbers that you need to know:
- ARV
- Rehab
- Fixed Costs
- Profit you want to make
ARV: Either get your real estate license or find an agent that you can trust and will be patient with you while you're learning the process. I would encourage the former because it has been so helpful for our business (and it allowed us to look at probably close to 100 houses before we bought our first), and my brokerage is fantastic and we leveraged off of their knowledge.
Rehab: This is not my strong-suit, but it is for my business partner. Also, the J Scott book should be a very good starting point.
Fixed Costs: This should include broker costs, taxes, utilities, transfer taxes, cost of money (of borrowed), etc. for the time you believe the rehab will take.
Profit: Determine what you want to make on a deal.
Once you have these four numbers, then take your ARV and subtract your (Rehab + Fixed Costs + Profit) and you'll have your maximum purchase price. (Side note: I would be conservative with your ARV and rehab costs - if not, you can be pedaling up the creek very early on.)
If you see that you're struggling with a lot of these numbers then try to partner with someone, or look for someone successful in your market that is doing what you want to do and see how you can help them in exchange for learning how to analyze deals.
Hope this was helpful.
