All Forum Posts by: Walter Key

I have a list of "Sites to Check" that I go to nearly every day to look at what's new. I then assess each property quickly to see where they're at (zip code, neighborhood, etc), what condition they're in, and how much they're listed for. Ones that stand out as a potential deal, I'll analyze further to consider an offer. 

But, reviewing all the new listings on a regular basis helps me build up my knowledge of the market I'm in so I can spot a deal quicker and easier when they arise. My list includes about 15 or so different sites ranging from wholesaler websites to HUD/REO sites, to Craigslist and eBay. I also have two search filters saved in my MLS access that catch anything new on the MLS that meets my criteria and I get a daily e-mail update from those as well.

It's ALWAYS a good time to buy IF the deal is right. ;)

Welcome from Orange Park, FL!

After you've determined ARV, you can use the 70% rule which Jeremy has already explained or you can drill down more specifically by using the MPP formula.

MPP = Sales Price – Fixed Costs – Desired Profit – Rehab Costs

Sales Price equals the conservative estimate of what I can sell the property for.

Fixed Costs equal all the costs, fees, and commissions that I can expect to pay during the project to BUY, HOLD and SELL the property.

Desired Profit is the minimum amount of money I want to make off the project when it’s complete.

Rehab Costs are the material and labor costs required to rehab the property into resale condition.

Scroll your mouse over the "Marketplace" tab at the top of the screen then click on "Hard Money Lenders".

Step 1: Pull comps. Look at similar homes to the one you're flipping that have sold within the last 6 months within a mile or so from your property. If the area is very dense, shorten that to 1/2 of a mile. If it's rural, maybe go out to a 2-3 miles range if needed. You need to make sure the comps are similar in size, style, age, etc to your property.

Step 2: Adjust comps. Once you have your comps pulled, take each one separately and adjust the value based any differences between your property and the comp property. For example, if you found a comp that's the same age and style but has 1 extra bedroom and 300 more square feet, you would adjust that comp price DOWN. If another comp has one less bathroom and is 200 square foot smaller, you'd adjust that comp UP. Make sense? Knowing exactly how much to adjust the comps for bedrooms, bathrooms, square footage, garages, fireplaces, pools, etc is highly dependent on your area but a good Realtor can really help get your numbers in line here.

Step 3: Determine your property's value based on the comps. So, let's say you found five great properties all within 1 mile of yours, they all sold within the last 3-6 months and they were all the same age and style as yours. After adjusting comps let's say you were looking at $155K, $145K, $160K, $157K and $149K. It would be fair to say that your ARV would be somewhere between $145K and $160K. You can average these five numbers together to get $153K. Or, if you want to play it really safe you can just take the lowest comp and run your deal analysis based on the lowest comp. When it's time to market the property and your Realtor says you should list for more than the lowest comp, you just built extra profit into your deal.

Does all that make sense to you? There's a great article here on BP titled "The Guide to Estimating ARV". Scroll your mouse over the "Tools" tab and click on the "file place" to find the article in question.

Welcome!

My first was a 100% financed VA loan for my primary residence which I turned into a rental upon moving to a new duty station. Of course, I could never do that for a flip.

What type of investment are you looking into? That may change the dynamic of how you get it financed.

You need to drill down on a couple things...

1) WHY? Why do you want to invest in the first place? What's your motivation for making money anyway?

2) GOALS? What's you're ultimate goal in it all? Build an empire? Have passive retirement income? Pass down a legacy of wealth to the next generation? What is it for you?

If you can do some self reflection and firm up those to factors in your mind, it may help solidify HOW you want to get where you want to be. Just my $.02, hope it helps.

If you're going to live in it for two years anyway, I personally wouldn't factor in those holding cost since at that time it's simply your primary residence. Two years of holding costs on a "flip" would make almost any deal a really bad one. So, counting them wouldn't really work in your situation. Just my $.02