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The Avid Rehabber Deal Anaylsis

Posted By: John Boyer In: The Avid Rehabber
Date: Thu, Jun 29th 2017 12:43 pm

The Avid Rehabber Deal Analysis

If you decide to become a Real Estate Investor you will have many obstacles getting to profit.  I have discussed previously the importance of after repair value (ARV) but what about the repairs?  How do you come up with a good repair number?  It is not easy!  After years of working the numbers, we at J and C Home Buyers have developed a fairly iron clad deal analyzer to get us to what  the repairs are going to cost.  Cindy and I have spent a lot of hours and money in our development of the business plan and we will give credit where credit is due.  We invested in our education through Fortune Builders and they gave us the fundamentals to put together a deal analyzer that we use on every project. The following are some basic points to analyzing repairs.

  1. Measure your property! If you are sure of the square footage this is your best starting point but you will also need measurements for floor covering, paint, trim and any dry wall repairs.
  2. Write down everything that will need to be repaired or replaced such as roof, gutters, windows, HVACs, water heater, doors, bathrooms and appliances (we put new appliances in all of our deals).
  3. If the project will lend itself to having an open floor plan determine whether the opening of a wall is load bearing.
  4. Inspect all electrical panels, switch boxes and main feed.  If you are uncertain get an electrician to help.
  5. Determine the level of landscaping the yard will need such as sod, tree work, shrub plantings and flower beds.  Remember curb appeal is a major factor in the resale of your property.
  6. Decide the percentage you want to use for contingency (for hidden expenses), we use a minimum of 12%.
  7. Now we plug those numbers into our spreadsheet analyzer and get to a repair cost that we have consistently hit. We use general contractors that do the work for that price or we hire subs for each part of the contract: painters, electrician, plumber, roofer, floor covering specialist etc.
  8. After each project we will adjust the individual numbers on the deal analyzer to adjust for the market in that area.

I will share with you a snap shot piece of our deal Analyzer. Stay tuned for some specifics on repair cost cutting!

Deal Analyzer
 
   
                 
  PROPERTY VALUES & PRICING   HOLDING COSTS Annually Monthly  
  After Repair Value $150,000   Property Taxes $1,340 $112  
  Current "As Is" Value $69,500   HOA & Condo Fees $0 $0  
  Estimated Repair Costs $39,200   Insurance Costs $500 $42  
  Purchase Price $60,000   Utility Costs   $200  
  Estimated Hold Time (months) 6   Miscellaneous Holding Costs   $0  
  Total Purchase & Repair Cost   Total Monthly Holding Costs  
  $99,200   $353  
                 
  Click to Select How to Calculate Your Loan ==>>   ARV      
                 
  FINANCING COSTS       BUYING TRANSACTION COSTS % of Purchase Total  
  First Mortgage / Lien Amount 75% $112,500   Escrow / Attorney Fees    $500  
  First Mortgage Points 0 $0   Title Insurance / Search Costs 0.25% $650  
  First Mortgage Interest 20% $11,250   Miscellaneous Buying Costs   $4,170  
  First Mortgage Monthly Interest Only Payment   $1,875   Total Buying Transaction Cost  
          $5,320  
  Second Mortgage / Lien Amount 0% $0    
  Second Mortgage Points 0 $0          
  Second Mortgage Interest 0% $0   SELLING TRANSACTION COSTS % of ARV Total  
  Second Mortgage Monthly Interest Only Payment   $0   Escrow / Attorney Fees    $500  
          Selling Recording Fees   $350  
  Misc. Mortgage / Lien Amount 0% $0   Realtor Fees 6.00% $9,000  
  Misc. Mortgage Points 0 $0   Transfer & Conveyance Fees 0.12% $180  
  Misc. Mortgage Interest 0% $0   Home Warranty   $500  
  Misc. Mortgage Monthly Interest Only Payment   $0   Staging Costs   $0  
          Marketing Costs   $500  
  Miscellaneous Financing Costs   $0   Miscellaneous Selling Costs   $0  
  Total Financing Costs   Total Selling Transaction Cost  
  $11,250   $11,030  
                 
ESTIMATED NET PROFIT & ROI SNAPSHOT
                 
  ESTIMATED NET PROFIT   TOTAL COSTS RETURN ON INVESTMENT (ROI)  
  $21,080   16.35%  
                 
  PURCHASE & DEAL ANALYSIS       POTENTIAL RETURN & PROFIT ANALYSIS      
  After Repair Value  $150,000   Assumes Sale is on or before  8/30/2017  
  Purchase Price $60,000   Purchase + Repair Estimate Cost Per Sq. Ft $78.48  
  Estimated Repair Costs $39,200   Down Payment Required at Closing -$52,500  
  Total Financing Costs $11,250   My Committed Capital -$5,360  
  Total Holding Costs $2,120   My Annualized Cash on Cash Return -786.57%  
  Total Buying Transaction Costs $5,320   Total Annualized Cash on Cash Return 32.70%  
  Total Selling Transaction Costs $11,030   Purchase + Rehab Return on Investment (ROI) 21.25%