The Avid Rehabber Deal Anaylsis
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.
- 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.
- 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).
- If the project will lend itself to having an open floor plan determine whether the opening of a wall is load bearing.
- Inspect all electrical panels, switch boxes and main feed. If you are uncertain get an electrician to help.
- 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.
- Decide the percentage you want to use for contingency (for hidden expenses), we use a minimum of 12%.
- 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.
- 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!
|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|
|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|
|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|
|Miscellaneous Financing Costs||$0||Miscellaneous Selling Costs||$0|
|Total Financing Costs||Total Selling Transaction Cost|
|ESTIMATED NET PROFIT & ROI SNAPSHOT|
|ESTIMATED NET PROFIT||TOTAL COSTS RETURN ON INVESTMENT (ROI)|
|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%|