How to calculate the purchase price for a Real Estate Flip?

I think everyone has the ability to flip a property at least once. It’s a fun and lucrative process, but it’s definitely not easy. It takes capital, knowledge, connections, and sheer determination to get it done. Before learning anything, what’s most important is knowing how to calculate the purchase price:?

1) You have to determine the ARV (After Repair Value). Without knowing what the maximum price you can ‘flip’ the property for, what are you aiming towards? You find the ARV by studying what other properties in the neighborhood sold for. Drive around the neighborhood, make appointments to check out the quality of current listings and new constructions. Also make sure to consult with other experts on their ARV opinions. ??????

2) Estimate repair costs to bring the property from present condition to ARV condition. This is where expertise comes in handy. If you don’t have builder skills already, make sure you get an estimate with a contractor you trust. This is KEY. Most people don’t profit flipping because they work with contractors who cut corners and take advantage of your lack of knowledge. ?????

3) Put a dollar amount to how much you want to profit (many investors are happy with a 15% return on their capital invested, but feel free to be an overachiever). Also put a dollar amount to your closing costs. This includes your real estate agent fees, holding costs, escrow, title, taxes, etc. The specific amounts and percentages vary from place to place, so be diligent with your research. ?????

4) Purchase price = ARV - (Repair Costs - Expected Profit - Closing costs)?

Simple enough, right? This is the most basic and most obvious formula, and probably the most accurate way to determine your offer price. It boils down to figuring out what can you sell the house for minus all of your expenses and desired profit. ???

Obviously there’s much more to this, but these are the basic first steps. I’m tryna provide as much value as possible to our community. Share this with anyone that might find value. Feel free to hit my DMs or shoot me an email if you wanna talk shop. ??????