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by Lou Castillo
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less to attract a buyer.
Rehab dollars differ from renovator to renovator depending whether they do the work themselves, or use cheap subs, or use an expensive general contractor. The scope of the work should be the same – it is whatever is required to make the investment look like the comparable houses (unless the plan is to sell well under market value). We do not attempt to obtain all of the various contractor bids when we are making offers. All the real deals would be sold before we’d ever have an offer together! Instead we’ve developed ranges of rehab dollars based on the overall condition of the home. Is it an exact science? No, but neither are the bids – there will always be something missed. So why not work with a guide that is probably 90% accurate and allows for quick offers?
Buy/Sell/Hold costs include expenses such as appraisals, attorney fees, title search & title insurance, loan origination fees, debt service, utilities, insurance, taxes, real estate commissions, and closing fees paid on behalf of the end buyer. Again, these costs vary depending on each investor’s individual situation. In the Atlanta area, 15% of the ARV seems to be a good average allocation for B/S/H costs. If you are the renovator, calculate your specific B/S/H costs, then utilize that percentage for future offers.
Profit margins are the fun part of the equation. How much do you want to make? If you’re wholesaling the property, you also want to consider how much you should leave in the deal for the invest |
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