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Real Estate Information |
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How Much Should I Pay For This House?
We probably answer this question for someone a couple times every week. The problem is that they don't have a good formula for determining the most they can pay and still make a profit - so they're scared to make any offer. Here's what we use for single family homes: The (MAO) Maximum Allowable Offer is calculated by first determining what the house will be worth after renovation - the ARV (After Repaired Value); less the rehab dollars required; less the Buy/Sell/Hold (B/S/H) costs; less profit margins. MAO = ARV - Rehab - B/S/H - Profit So let's break that down a little further. To determine the ARV, study comparable sales data. Comparable sales are those properties which sold in the last 6 months to 1 year, and within ˝ to 1 mile from the subject house. But other factors must be considered as well. The more characteristics between the properties that are similar, the more valid the data. Make sure that the house itself is similar in square footage, bedrooms and baths, age, style, and architecture. Don't worry about condition except as it will affect the amount of rehab dollars required. Next, look at the neighborhood and the individual street. Do they look the same? Or is the comparable property on a beautiful street while the subject property is on a street riddled with empty littered lots and boarded up houses? The point is to view the potential investment as your end homeowner occupant will. If they could buy your completed investment on the bad street, or a house on the beautiful street - either for $150,000 - which would they choose? The other house of course. Which means your house is not worth the same - it must sell for 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 investor buyer to make the deal attractive. That's it. That's how you calculate the most you'll pay for a property. But that's not what you SHOULD pay. It is the maximum you'll pay. It is the deal-breaker. You will not pay one penny over the MAO. Your negotiations should lead you as far below the MAO as possible. The difference in amounts is additional profit in your pocket. What you SHOULD pay is the minimum price below the MAO that the seller will accept. We call this the MIN-O. Have a rich week, Lou FREE! Real Estate Investing Secrets To Earning $100,000 Your 1st Year! -- 11 Overlooked Real Estate Statregies That Will Turn Your Investing Business upside Down And On The Fast Track TO Success...Guranteed! Plus A Bonus Track With A Secret So Successful It Can Double Your Investing Income Overnight! http://www.InvestorSuccessTactics.com
MORE RESOURCES: 'Nepo homebuying' isn't as popular as it used to be. That's actually a bad sign for the US real estate market. Business Insider Massive portfolio of Eastern Market real estate hits the market Crain's Detroit Business Jennifer Lawrence quietly sold a big-dollar Beverly Hills home â is she doubling down on New York? New York Post The âMost Colorful Home in Queensâ Has a Dark Secret The New York Times Greenwood Village-based real estate firm acquires Corporate 25 office campus in Centennial The Denver Post Babson Launches New Institute for Real Estate and Entrepreneurship ¡ Babson Thought & Action Babson College How AI is transforming real estate Times Union MoxiWorks continues to fortify its executive team Real Estate News by RealEstateNews.com Real Estate Transfers: Sept. 18, 2025 The Suffolk Times Ascot sues to cap E&O payouts after costly real estate wire fraud Insurance Business America Firm Real Estate Puts 21 Properties Up for Sale in Eastern Market District DBusiness Magazine Hempel Real Estate acquires 80,000-square-foot medical laboratory property in Maple Grove REJournals IMAGE Studios Franchise: A Scalable Real Estate Investment 1851 Franchise Former Mall at Turtle Creek property sold, real estate developer confirms Jonesboro Right Now Real Estate Mrkt. Steady, Prices Coming Back to Pre-COVID Woodall's Campground Magazine Duquesne University to offer real estate major TribLIVE.com KKR Expands Boston Footprint with 132,000-SF Lease at International Place in Landmark 15-Year Deal â One of 2025âs Largest Office Transactions Boston Real Estate Times Early Education Nonprofit Moves from Lexington to Woburn Boston Real Estate Times Lot Lines: 2025 Commercial Real Estate Summit The Journal Record Shelter Island Reporter Real Estate Transfers: Sept. 18, 2025real estate Shelter Island Reporter Top residential real estate sales for September 1-5 in Sarasota, Siesta Key, Palmer Ranch, Osprey, Nokomis Your Observer Threlkeld Homes Team joins Wallace Real Estate Knox TN Today PACE Equity Unveils Flexible Large-Asset Financing Product, Closes $63M Resort Deal in Utah Boston Real Estate Times Don Giesler Sr. remembered for four decades in real estate Perryville Republic Monitor Exclusive | NYC Real-Estate Firm Nears Deal to Buy Troubled Office Landlord Paramount The Wall Street Journal Could interest rate cuts help jumpstart Cape Coral housing market? Local brokers weigh in Fox4Now.com How a 43-story tower got the green light to build The Charlotte Ledger Real Estate Investing / The Real Deal Monthly Meetup Dundalk Eagle Homes for Sale in Manhattan and Brooklyn The New York Times When a College Dies, Who Gets the Campus? Bloomberg.com A guide to how counteroffers work in real estate The Daily Gazette Homes for Sale in New Jersey and New York The New York Times Transwestern taps veteran broker to lead Chicago office Crain's Chicago Business Real estate will âwork closely with Mayor Mamdani,â REBNY chief Whelan says Crain's New York Business How much were the 10 most expensive reported home sales in Hernando and Citrus last week? Tampa Bay Times A guide to how counteroffers work in real estate The Grand Island Independent Best Real Estate Projects 2025: Crawdads on the Lake The Business Journals Backstory: Hamptons Real Estate Negotiation Strategies Danâs Papers Officials close eight Puerto Morelos real estate developments for irregularities - Riviera Maya News A guide to how counteroffers work in real estate The Independent Record Homes in Monroe County sold for lower prices recently: See how much here Monroe Evening News Israeli minister says negotiations âhave startedâ with US to turn Gaza into âreal estate bonanzaâ Washington Examiner Salisburyâs August real estate sales The Lakeville Journal Smotrich says Israel sitting on a 'real estate bonanza' in Gaza, talking to the US about dividing it up The Times of Israel Mass. colleges rely on valuable real estate to offset financial woes The Business Journals How Local Real Estate Groups Are Stepping Up for North Texas Giving Day and Every Day CandysDirt.com Parvis Expands Global Real Estate Access for Investors Seeking Diversification & Expands into US Market TradingView Iâm 37 and live with friends. Owning a home can wait. The Boston Globe Bank of America to buy âŹ100M of real estate loans from Santander - report (BAC:NYSE) Seeking Alpha |
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