Start with realistic value
Investors look at recent comparable sales, property size, age, condition, location, demand and—when relevant—rents and operating income.
Then estimate what has to happen after closing
Repairs can include visible work and a reserve for things that are not obvious at first glance. For rentals, the analysis may also include vacancy, management, taxes, insurance, utilities and capital expenses.
Then add the costs sellers often do not see
- Loan fees and interest
- Closing costs
- Insurance and taxes during the hold
- Utilities and maintenance
- Resale commissions or disposition costs
- Permits, contractors and project management
- Contingency for delays or surprises
Finally, account for risk and profit
An investor is taking the risk that the renovation costs more, the market softens, the property takes longer to sell or rent, or an unexpected title, tenant or condition issue appears. The deal has to leave enough room for that risk and for a profit if the project succeeds.
What this means for sellers: a direct offer can be lower than the best retail price and still produce a sensible outcome when you compare repairs, fees, holding time, convenience and certainty.
Want to see how Auctus evaluates these factors? Read our process or call 706-818-8831.