Do you know how to value a property as-is? Do you know what a potential wholesale buyer is willing to pay for your property? Cory Boatright shares his advice with us on today’s FlipNerd.com Expert Tip show!
Mike: Hey there, it’s Mike Hambright from FlipNerd.com. We have a quick Expert Tip to share with you from Cory Boatwright, who’s going to share a tip on how to determine the value of any property, whether you’ve seen it or not.
This Expert Tip is sponsored by, RealtyMogul.com, B2R Finance, and AceBuisnessFunding.com.
Cory: Hey, thanks Mike, I appreciate it. So there’s times where you’re just not able to see a property but you’ve got to determine on what you can make an offer on that property. There are a lot of different formulas out there. One that we found that works really well is, it’s a little acronym. And it’s W, and that stands for worth. M stands for market, R stands for repairs, and P stands for profit. Okay? So follow me.
Let’s say on your worth, how do you determine what the property is worth? Well you go and look at the three highest comps. So let’s say you have a comp for 120,000, 130,000 and 110,000. That’s $360,000 if my math is correct. So you would take that 360,000, divide it by 3, and you come up with a number that’s 120,000. That’s going to be your highest number that you can use in this equation, for your worth on a property. In other words, that’s the highest that that property would sell for and that’s what number you’re going to use in this equation.
The next number from your worth is market. What I mean by market is, what’s the wholesale market in your area? I found that in the Midwest area that number is 70%. In the east, on the East Coast, it’s about 80% and on the West Coast it’s about 90%. So for this example, on a $120,000 for an average of a house, you would take that times 70%. And if my math is correct, that is going to be $84,000. Okay, so now you’re at $84,000 and that is your market, right?
Next one is repairs. Well, you’ve never seen this house, how do you know what the repairs number is going to be? Let me give you a number that has really helped and it works most of the time, it’s $12.50. So let’s say you have a 1,000 square foot, you take that 1,000 square foot house times $12.50 and you come up with 12,500. Twelve thousand five hundred is what you’re going to use for your repairs.
Now, the next acronym part of this is your P, for profit, right? So now you’re at 71,5000. You’re taking 84,000 minus 12,500, 71,500 and now you want to figure out what you have for profit. We use, for a wholesaling, we use $10,000. Now, do you always get 10,000? Not always, but it’s great to use 10,000 number, because you can always have room to negotiate.
So take 10,000 from 71,500, now you’re down to 61,500. For a $120,000 property, you need to make an offer around 61,500. And that’s the way that you make sure that you make an offer on a property and you know pretty much that a buyer will buy it from you and you can make up to $10,000 in your profit. So I hope that’s helpful.
Mike: We’d like to thank Colony American Finance, National Real Estate Insurance Group and VirtualStaffNow.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky