From the course: How to Analyze a Wholesale Deal in Real Estate
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The fixed costs method - Microsoft Excel Tutorial
From the course: How to Analyze a Wholesale Deal in Real Estate
The fixed costs method
- Hey guys, welcome back. We went over the 70% rule and why fix and flip investors use it in the previous lecture, but we also saw that it has its disadvantages because it assumes all markets are created equal. In this lecture, we're going to be looking at an alternative method, one that you're going to be able to use to factor in more market-specific assumptions. The difference is that instead of using a broad stroke that lumps the investor's holding costs as well as their desired profit margins into an arbitrary figure, like 30% of the ARV in the 70% rule, we're going to break it out a little bit more. Specifically, we're going to break it out into two main categories. The first one is the investor buyer's desired profit. And this one is going to be pretty easy, right? Once you start working with investors in your area, all you need to do is ask a few of those investors what kind of profit margins they're expecting to make on their deals and you'll be able to factor that in. Now you…
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