How to chose a good investment property

Question

I’m working with a buyer who’s looking for a solid fix-and-flip opportunity. I’d love to hear how you help your investor clients determine if a property has strong potential. What strategies, numbers, or insights do you focus on to guide their decision-making?

Daniel Rehem · Accepted Answer

I work with several investor clients, and when it comes to fix-and-flip properties, having a clear system to evaluate deals is key. Here's how I typically help clients break it down:What I Focus On for Fix-and-Flip Clients:1. ARV (After Repair Value):We start by estimating the ARV using nearby comps that are fully renovated and have sold recently. Ideally, they should be within a half-mile radius and sold in the last 36 months.2. Repair Costs:I recommend having a trusted contractor walk the property ASAP. In the meantime, I help estimate repair costs based on square footage and condition (light, medium, or heavy rehab).3. Purchase Price vs. Total Investment:We look at what the investor would pay for the home plus the estimated rehab budget and holding costs.4. Profit Margin & Exit Strategy:Every investor has different goals, but most are looking for at least a 1020 return on investment or a minimum $25K$50K net profit depending on price point.Common Wholesaler / Investor Formula:Most wholesalers and experienced flippers use this simple formula to quickly screen deals:MAO (Max Allowable Offer) = (ARV  70)  Repair CostsARV = After Repair Value70 = Common target to account for profit, holding costs, closing costs, etc.Repair Costs = Estimated rehab budgetThis formula helps investors stay in the green after all is said and done. In todays market, some are adjusting that 70 to 7580, depending on how hot the area is or how fast things are moving.Extra Insight:I also help my investor clients:Pull historic pricing data to see trendsCheck for upcoming zoning changes or developmentsEvaluate school ratings, rental comps, and resale compsGet quick feedback from local contractors or stagers if needed. Feel free to reach out!!

Pate Herrold

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