OfflineHi everyone. I'm currently attempting the 25 to 1 with an agent, but there are a few things I'm confused about and hopefully someone can help. She has sent me some listings and I want to begin making offers. I know how to figure the offer price of a deal based on comps and the rest, but that involves subtracting the repair costs. I don't know how to determine the repair cost. Do I just put out offers of 50 percent? All of the listings I would do this on are as is, vacant, and had price reductions. I'm sure you don't walk through every house you're going to make an offer on before making the offer, but how to you figure the repair costs without doing so before making an initial offer?
thanks
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-Steve
Anyone?
-Steve
Anyone?
-Steve
One thing you can do to get an idea of repair cost is to try to get a calculated estimate through an agent. You can do that by having your agent get with the listing agent and getting their opinion of what repairs are needed. The rehab costs will fall into three areas light, medium or heavy. From there you calculate a cost per square foot.
light $10 per square foot
meduim $20 per square foot
heavy $30 per square foot
Remember to have the 14 day inspection period and when you get an offer accepted you can view the property to make sure the rehab cost are what you calculated. If you are off you can try to renegotiate the offer amount or get out of the contract.
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It's suprising that this is not clearly explained each time the 25:1 is mentioned.
P.S. - Everything else is immaterial, irrelevant, and unnecessary.
"I'm sure you don't walk through every house you're going to make an offer on before making the offer, but how to you figure the repair costs without doing so before making an initial offer?"
That's why you offer 50% and only worry about inspecting the accepted offers. In some cases you may get a counter, then you can see if that one actually warrants an inspection and a tighter estimate. 25-1...out of 25 offers,you may have to worry about looking at 1 property.
If your offer is accepted at 50%, if you apply the standard formula of
70% of ARV - repairs, you will have 20% available for repairs. If it doesn't need that much for repairs, bonus. If it needs more, either offer a lower price or use you escape clause.
Hey Steve, from what I learned from watching a couple of Mat Larson's videos and calling deans experts for advice, I found out Mat doesn't walk through every house to make an offer on. You have to find out what is the average price these banks are letting go of these foreclosures for. I think the market in CT to offer 50% of asking price past already. You may get 100/1 by doing that. I found from offering anywhere from 20%-25% you will get an offer accepted in CT right now. If not bump up your offers by 2% or lower them, you will find the sweet spot by doing this. And then when your offer is being consider of being accepted or your counter offering, then that's when you tell your agent to get you in the house and check the repairs before going forward with the offer. Get a contractor to go with you to give you the estimate repairs. But if you get a house accepted before you went in to check the repairs just make sure you have your 14 day inspection and you will be fine. Good luck
Reynold Orozco
Thank you everyone for your help!
-Steve