{"id":514,"date":"2016-12-20T10:57:17","date_gmt":"2016-12-20T14:57:17","guid":{"rendered":"http:\/\/www.realestatejunkie.com\/blog\/?p=514"},"modified":"2016-12-20T10:57:17","modified_gmt":"2016-12-20T14:57:17","slug":"knowing-the-after-repaired-value-on-your-flip-house","status":"publish","type":"post","link":"https:\/\/www.realestatejunkie.com\/blog\/knowing-the-after-repaired-value-on-your-flip-house\/","title":{"rendered":"Knowing the After Repaired Value on Your Flip House"},"content":{"rendered":"

\"\"<\/a>As an Investor, having a Realtor to work with is important in your business if you are buying or selling houses on the Multiple Listing Services.\u00a0\u00a0 Many new Investors rely on their Realtor to send them \u201cgood deals\u201d to buy, hold, fix and\/or flip.\u00a0 However, a Realtor does not know what good deal means to an Investor.\u00a0 A good deal for us could be the cash flow that you receive on a rental property or it could be the profit that you would receive from reselling the home.\u00a0 As Investors, you are taught a MAO \u201cMaximum Allowable Offer\u201d Formula in which you use to make offers on homes for buying, fixing and reselling.\u00a0 The formula varies based on your own situation.\u00a0 The average formula used for Investors who have to get hard money to purchase the home would be:\u00a0 ARV (After repaired Value) x 65% – Repairs = MAO.\u00a0 Let me give you an example:\u00a0 $100,000 (ARV) x 65% = $65,000 – $10,000 Repairs = $55,000 Maximum Allowable Offer.\u00a0 This formula would then leave you with $35,000 for holding costs, cost of money, closing costs of purchase and resale, and then profit.\u00a0 Your MAO formula would be different if you are purchasing the home as a Landlord and\/or you have your own money to fund the deal.\u00a0 You may be willing to pay between 70-75% of the After Repaired Value for the home – Repairs = Your MAO.<\/p>\n

Determining the After Repaired Value on a property is very important and you should use comparables no more than .5 miles away and no more than 6 months old.\u00a0 I like to stay in the subdivision where your property is, as each subdivision has its own amenities such as gates, pools, and homeowner associations which will make a difference on your comparables.\u00a0 When making an offer on a home, you should always drive AT LEAST 2 streets in front of the house and 2 streets behind the house.\u00a0 Always pay attention if the subdivisions change drastically in the price and the subdivision amenities.\u00a0 I also like to ask for active, active with contracts and pending properties in that area so you will know what comparables are going to close that you are able to use for comparables.\u00a0 Obviously, you can\u2019t use active houses or pending houses until they sell, but knowing that the same square footage house as yours in the same neighborhood is selling for $20,000 more is very important.<\/p>\n

Many Realtors are able to set you up with a website for your comparables so that you can take the time to look at each and every one of them.\u00a0 Key factors to look for are the date they sold, what type of sale it was, and all the updates that were completed.\u00a0 I have found that often Investors will either go too high or too low on determining their After Repaired Value.\u00a0 When I first started out as an Investor, I hired an Appraiser to come out and appraise the house in its present condition and also in an after-repaired condition, too.\u00a0 I learned so much from the Appraiser as to what would increase the value on the property and what would not; but this was done after the home passed my home inspection and I had used sold comparables to determine what I thought would be a fair after repaired value.\u00a0 You could also ask your Realtor to provide you with a comparative market analysis (CMA) by either providing them the address and pictures of the house, or taking them to the house and providing them with a list of upgrades.\u00a0 Also, ask them what they what price they would list the house.\u00a0 \u00a0\u00a0However, what I did find was that, if you were using the same Realtor to buy the house and then to re-list to sell, sometimes their values would be higher than what you could truly get.<\/p>\n

I would suggest that you have a minimum of 6 solid comparables that you can use to determine the after repaired value on your property.\u00a0 The comparables should have almost the same amenities such as:\u00a0 garage, carport, pool, basement, Florida room, same number of bedrooms\/bathrooms, no more than 100 square feet difference than your house, and should be all one story or all two stories, if possible.\u00a0 Why six comparables?\u00a0 That is because if you are selling your home to an FHA Buyer, you will need two appraisals when selling after 90 days from your purchase date, as they require that the Seller (You\/Investor) has owned the home for a period of 90 days.\u00a0 In addition, the Purchase Agreement cannot be signed between the Seller (You) and your new Buyer until the 91st<\/sup> day that the Seller\/Investor has owned the property which is called \u201cseasoning.\u201d\u00a0 You can sell to a cash, conventional or VA buyer; however, before signing a contract with any Buyer, always call the mortgage company and ask if there is a \u201cseasoning\u201d requirement for the Seller as you are selling a flip house.\u00a0 I also like to have sold comparables that are no more than 6 months old so that is why I will look at the active, active with contract and pending properties, too.<\/p>\n

Remember, you will need to purchase the property, rehab it, and if you can\u2019t sell it to cash, conventional or VA Buyer, then you will need to wait 91 days to sell to an FHA Buyer.\u00a0 This would mean that if you are counting on your comparables which are already 6 months old from the date of purchase, they are now 9 months old and the appraiser may not use them due to the fact that our market is always changing.\u00a0 Remember though, an appraisal is just an opinion and if you have provide the appraiser with comparables close to all the amenities of your house and a list of all the updates, you should have no problems with the house appraising especially in a Sellers\u2019 market.<\/p>\n

I suggest you learn your market and stick to investing in a few select neighborhoods that you really know the market value of houses.\u00a0 I am not saying don\u2019t make offers out of your area, but finding your niche neighborhoods will make you tons of money.<\/p>\n

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to kick off 2017 with high success and bring your Real Estate Dreams to Life!<\/p>\n

 <\/p>\n

Kimberlee Frank<\/strong><\/span><\/p>\n

www.ForeclosuresGoneWild.com<\/a><\/p>\n

www.RealEstateJunkie.com<\/a><\/p>\n

www.ShortSaleNegotiating.com<\/a><\/p>\n

www.SellFastRealty.com<\/a><\/p>\n

Like me on www.facebook.com\/foreclosuresgonewild<\/a><\/p>\n

Like me on www.facebook.com\/sellfastrealty<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

As an Investor, having a Realtor to work with is important in your business if you are buying or selling houses on the Multiple Listing Services.\u00a0\u00a0 Many new Investors rely on their Realtor to send them \u201cgood deals\u201d to buy, hold, fix and\/or flip.\u00a0 However, a Realtor does not know what good deal means to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,11],"tags":[24,25,41,12],"class_list":["post-514","post","type-post","status-publish","format-standard","hentry","category-local-guru","category-free-articles","tag-fix","tag-flip","tag-florida","tag-kimberlee-frank"],"_links":{"self":[{"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/posts\/514","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/comments?post=514"}],"version-history":[{"count":0,"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/posts\/514\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/media?parent=514"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/categories?post=514"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.realestatejunkie.com\/blog\/wp-json\/wp\/v2\/tags?post=514"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}