How can a real estate investor make sure they purchase real estate investment properties at the right price?
Whether you have heard it before or not, there’s no more true statement in all of real estate investing than this: If you by properties right then you can’t miss. The purchase price dictates whether you will get approved for funding and whether a private lender will fund your real estate investment purchase.
The purchase price is everything.
I have a simple solution for you. Use the Strategic Real Estate Coach Automated Offer Formula.
When making offers on properties, it’s the same equation every time. I use my Automated Offer Formula to find the max purchase price I can pay on a property and then simply try to acquire it at a price below that price.
This formula is what I use EVERY SINGLE TIME on every, single property I bid on. The math always works out. It’s simple. If I can get the property using the formula below, I buy it and so should you. If the seller wants a higher price than this formula allows, then I would pass on it and move onto another property and so should you.
Using the Automated Offer Formula
- Take the Realistic Salable After Repaired Value of the subject property. (Real estate investors can get this value from a real estate agent who can run a Current Market Analysis or a “CMA”. A CMA is a report made up of 3 sold properties that have sold and transferred in the past 3 months, 3 pending comps that are currently under contract and awaiting transfer and 3 active properties that are on the market.)
- Multiply The Realistic Salable After Repaired Value of the subject property times 68%-70%
- Subtract the repairs needed. (if you need a repair estimator check our hammerpoint.com)
- The final remaining number will give you your MAXIMUM offer price
Here’s a real life case study example, we recently bought and flipped 2227 7th St.:
We started with Step 1: The After Repaired Value.
We determined we could sell it for about $140,000.
We then moved onto Step 2: Multiplied times 65%.
Grab a calculator and do the math. $145,000 x’s 65%. That’s $94,250.
Then move to Step 3: Subtract the repairs (you can use software like www.hammerpoint.com to determine repairs). We determined that 7th street needed $30,000 in rehab and repositioning. So finally, subtract $94,250 minus $30,000 and that leaves $64,250 as our max offer price. We bought the property for just $62,000. PERFECT! It meets the Automated Offer Formula.
It also leaves us $49,000 in gross profits to work with (the difference between $145,000 (sell price) and $92,000 (all in investment) which is a nice profit spread and ensures we will make a profit even if something goes wrong.
As most of you know, I’m in the Greater Cleveland area and we had a ROUGH winter. It was subzero degrees almost the whole month of February.
Once the weather cleared up, we were able to really hunker down and get some houses turned around very quickly and on the market.
Watch the video below for an overview of 2227 7th St. and the Automated Offer Formula broken down to see exactly how it worked for us.
Like I mentioned above, the market I’m consistently buying in is the Greater Cleveland area, but if you live in a hotter market like somewhere in California, Vegas or Seattle, I can show you how to adjust the formula to fit your needs. Simply multiply times 70% instead of 68%. In those hotter markets prices are also much higher so there’s a larger profit spread.
Have you used my Automated Offer Formula? If not, start today. Go make an offer on a house using this formula. If so, how has it worked out for you? Leave your own case studies in the comments below.
We’ve seen many, many of our subscribers and members use the Automated Offer Formula and have great success with it and close very profitable real estate deals.