Creative Real Estate Financing — The Fixed Cost Method

Fixed Cost Method:

ARV — Fixed costs — Investor’s Proft — Wholesale Fee — Rehab Costs = Maximum Allowable Offer

Fixed costs -> various fees, commissions, and costs associated with all parts of the investment project

Most typical fixed costs include:

Inspection Costs ->

Lender Fees ->

Closing Costs ->

Mortgage Payments ->

Property Taxes ->

Utilities ->

Insurance ->

Commissions ->

Selling Closing Costs ->

Home Warranty ->

Termite Letter ->

MLS Fees ->

Understand your Buyer and the Neighbourhood

• What level of finishing does your buyer wish to plan this rehab?
• You do not want to do rehab that is out of touch with the neighborhood. A better bet is to make the rehab good enough to reach the upper echelons of that neighborhood, but not so much better than it is out of reach and sync with other houses

Tour the Property in Detail

• Walkthrough the property very slowly
• Take A video with commentary. You can even use this for content

Write down the problems in each part of the property

• Does the carpet need replacement?
• Make sure to analyze every nook and cranny of the property
• The outdoor components, the indoor components, and the general components
• Condition of the roof, siding and any outbuildings, exterior painting, decks/porches, concrete, garage
• Demo, plumbing, electrical, HVAC, framing, insulation, sheetrock
• Permits, mold, termites, miscellaneous, landscaping septic, foundation, carpentry, interior painting, cabinets/countertops, flooring