All Forum Posts by: Kevin Shaper

Thank you Mike.
That is Awesome.

Thank you for actually taking the time to read all my questions and attempt to understand. I think this will one of those answers linked to for a long time :)

I thought similarly about the 70% value and have found others saying similar - it's a general starting point but may vary based on different factors.
Still learning here in So Cal.

I just needed to get better clarification of the formula and when & when NOT to rely 100% on it. It seems a bit simplistic and vague, but I guess experience will judge HOW you use it and adapt it.

Thank you again.
Kevin

I need a little help understanding a few things:

I see the following posted all over the web verbatim:
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A Typical Deal By The Numbers

This is how I and many "real" Rehabbers look at a deal;
Max Selling Price 1: $150,000.00
Acquisition Cost 2: - $7,500.00
Repairs (estimated) : - $9,000.00
Four month Average. Hold Cost : -$4,900.00
Min Profit (15%) : - $22,500.00
Misc expenses (5%) : - $7,500.00
Cost to Sell (5%) 3: - $7,500.00
Max Purchase Price : $91,100.00
Additional (Not covered by loan) expenses : $7,500.00

1 Based on selling it fast and based on the low to avg selling price/sqft
2 Title work, Dwelling Ins., Loan Fees & assignment fees
3 Listing with someone like MyCastle.com for 3% plus $500, Closing costs, etc.
FYI: Max Hard Money Loan = $105,000 based on a max of 70% ARV
************************************************

Now let me ask a few questions:

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-Question 1-
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Why would you not include the 7,500 additional expenses and lower the Max Purchase Price to $83,600?
Otherwise your 15% profit isn't really 15% profit - it is really 10%($15000).
-OR- Is Max Purchase price based on a specific formula (70%ARV - (repairs + hold cost))?

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-Question 2-
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Which of these is more accurate??

A)Basic Subtractions:
Repairs (estimated) : - $9,000.00
Min Profit (15%) : - $22,500.00
-----------------------------------
Current Max Purchase Price = $118,500k

-OR-
B) is it MaxPurchasePrice = ARV-30%-repairs ($96K)

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-Question 3-
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HOW ACCURATE ARE THESE #s below? Do these 5% numbers change depending on home price or always fixed? or something else?

Acquisition Cost 2: - $7,500.00
Misc expenses (5%) : - $7,500.00 (What are these misc expenses?)
Cost to Sell (5%) 3: - $7,500.00

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-Question 4-
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Now let's look at the 'subject to'
Four month Average. Hold Cost : -$4,900.00
This is bases on the 70% Hard Money Loan at 14%

If you are doing 'subject to', doesn't this Hard Money Loan potentially change significantly?
Won't it really be the ARV*70% - Loan amt? or some such calculation? which includes (repairs, misc, buy, sell costs)?

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-Question 5-
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Lastly for an assignment, there are no double closing costs, and the formula is what?
ARV*70%-repairs = the price an investor will pay. Assigning it to an investor means paying less or the investor getting slightly less? Who takes the hit? :)
Does all this formula stuff change if assigning to a retail buyer,


I am not looking to LEARN every possible deal type. Just better understand how the formula works/is relative in different situations.

Thanks for any & all who can add clarification for me.
Is there some place where all this is defined already?

kevin

I also am in Southern Cal - Namely OC and am interested in anyone that may be able to point me to what to know.

Which Lonnie book should I start with and is there anyone familiar with southern california pricing issues?

thanks
Kevin