All Forum Posts by: Richard Warren

Talk about the inmates running the asylum!

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Depreciation is based on the value at the time you placed it in service. It is the value lost (depreciated) each year as a property ages. Everything has a useful life and loses value as it wears out and needs to be replaced. That’s why different items have different depreciation schedules . Differences in value are made up when you sell via capital gain (or loss).

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#1 - rental demand in the area.

Also, location, condition, and amenities that renters in the area expect.

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If you put it under contract it will have a price. It depends where the estate is at as well, who has to approve the sale? The heirs or the court? The one I mentioned had to be aproved by the court so there would be no renegotiation. You really need to determine a price based on comps before you put it under contract.

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How are you going to feel about a VAT?

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One of my best deals was on an estate sale because it had to be sold quickly. I was prepared to pay as much as $75k but got it for $48k because I had the cash to close quickly. It helps if you understand whether they are more concerned about the timing or the price. In estate sales it is frequently more important to get it sold quickly.

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Yeah Steve, that's a typo. Real rehabbers have their morning coffee before responding to posts! :oops:

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You say most rehabbers in your area would be happy with a $20k profit. I doubt that is the case unless they aren’t professionals. A $20k profit on a $50k house is very different that a $20k profit on a $150k house. Could that $20k figure be wishful thinking on your part? If you brought that deal to me I would turn it down in a flash.

Here’s how a professional rehabber would look at that deal:

(ARV â€" repairs) x 70% = Maximum Purchase Price

ARV = after repair value. That is what it can actually be sold for quickly. That is probably less than your appraised value. For this example we’ll use the appraised value as the ARV and assume that your repair figure is accurate (though you don’t indicate how you arrived at that amount).

($148,000 - $18,000) x 70% = Maximum Price
$130,000 x 70% = Max Price
Maximum Price = $91,000

That 70% number is not a given. If the market in your area is weak or repairs are expected to take a long time that number needs to be lower. If the buyer is using cash the number could be higher because of reduced holding costs. Personally, my number would be more like 60% in my market even though I am usually a cash buyer.

I would also assume the ARV to be lower than you state and the repairs to be higher. That’s usually the case with wholesalers â€" they tend to be overly optimistic with their numbers in order to make the deals look better. To catch my interest the sale price would need to be around $75k, but every area is different.

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Interesting article by Charles Krauthammer in the Washington Post today. His theory is that a Value Added Tax is the ultimate goal of the Obama administration. It may be the only way to generate the massive amounts of revenue needed to pay for all government obligations. I don’t mind the idea of a consumption based tax instead of an income tax. Unfortunately it would probably be in addition to.

Check it out:
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/25/AR2010032502406.html?hpid=opinionsbox1

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Many areas of Vegas have real cash flow for the first time since the early 1990s. While there are good deals around, there is a lot of competition right now. Because of the number of investors who are purchasing REOs and renting them out while they wait for a rebound rents have been dropping. As far as quality tenants, they are here but you still have to screen them properly. If you search the forums for “Las Vegas†you will find a few current discussions on the area.

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