All Forum Posts by: Richard Smith

Thank you, this helps out tremendously.

@Russell Brazil That makes sense. My concern is that the agent I’m working with has a median closing price around $200k from what I’ve been able to gather. The properties I’m interested in are far less than 100k. That would be quite a difference in commission, for the same amount of time. I know the better I become, the less time I’ll need from an agent, and my price range will increase as well, so I believe my agent sees the potential of the relationship, otherwise, they wouldn’t be offering so much. 

Thanks @Ronald Allen Barney! I understand a lower price isn’t always possible, but I was just wondering if this is common practice in this scenario. Also, I’m just getting started, so I don’t yet have the momentum to purchase multiple properties a year. My agent is good and dealing with me, but I am also taking their time and looking at properties far below their average client buying prices. I’m seeing it as the same work for less compensation, at least short term. Especially with so many buyers out there in a higher range. But this is my first time working with an agent and don’t completely understand how an agent thinks. Any further insights are much appreciated! 

Hello all, fairly new to the REI world, but seem to be getting a foothold.

I was wondering if anyone gives their agents "bonus" commissions. As a REI I'm understanding the idea is to buy as cheap as possible. In turn, when working with an agent, this would seem to automatically disincentivize an agent to help negotiate a lower buying price.

So, in the event that a great agent helps you land a deal for less than you were expecting, and hurting their own commission, does anyone compensate their agents with some of the savings?

Thanks!

I know this is old, but for possible benefit to future readers.

I have been using the 70% rule for BRRRR analysis. This essentially gives me an offer price that will allow me to receive at minimum, all of my money back after refinancing, excluding closing and holding costs. That is, if the ARV estimate is accurate, but also gives me some wiggle room with LTV ratio as well on the refinance.

Example. Analyzing a current property listed for 39,500.

ARV x .7 - rehab cost= my max offer

ARV is looking at 60,000.

Rehab is looking  around 10,000.

70% of ARV is 42,000, minus 10,000 for rehab, equals max offer of 32,000.

I do my best to underestimate ARV and under estimate refinance LTV, this could cut into number of deals acquired but reduces risk of over estimating and having money tied up in the property. Especially starting out with little cushion money.

If the appraisal comes in higher, which is a good chance if you mindfully underestimate, or the LTV of the refinance is higher, then I should be doing great.

Hope this helps and if anyone has any further insights, please share!!

Also interested in this answer. A little information button next to this would be great!

Update: After a little more digging, I can assume one number is for each loan. 

Initial purchase/Refinance.

I’d love to bring a rise to this question again. I’m currently wondering the same question. I’d like to submit a clean analysis to lenders without having the extra explanation of adding rehab to purchase cost on the analysis. This would be a great addition to an already great tool!