If you could create could invest $3000 and in return receive $400, $300 or even $200 per month would you do it? Hopefully the answer is yes! When it comes to investing, most are looking for at least a 10% return on investment (ROI). With an income of $300 per month, the $3000 is returned in ten months and the 10% is returned in 11 so for someone in real estate, this is a no brainer. If you read my previous post, you will know that I recently purchased an 8 unit apartment building in Norfolk. When the property was under contract, I noticed two doors in the back and two boarded up windows. The previous owner said that it used to be a community washer/dryer but now is used for storage and that she hasn’t been inside the space in over 10 years. After I purchased the building, I changed the locks on the ‘storage space’ and went inside…both sides had tons of junk. On one side, behind the old appliances and old parts was another door. Inside that door, somehow a full bathroom existed, but only 3 ft by 8 ft. Full bath, 3 feet wide and 8 feet long. Just imagine a 3 ft shotgun shower with a tiny toilet across from it and a pedestal sink in between. It’s hard to imagine a bathroom that small but someone used it back in the day.

So I started thinking: the TOTAL space on the side with the bathroom is 128 sqft. Is it possible to make it a livable space and rent it out? Should I just add a washer dryer for the tenants instead? Should I just leave it as storage? Storage is important in an apartment building but the other adjacent space (80 sqft) could be used for that. I could put a washer/dryer in the space for the tenants but then what? How do I regulate it and is it really worth the effort/maintenance? Probably not. This leaves an opportunity…the bathroom infrastructure is there, a meter is already in place for electricity, baseboard heating is in place, and one of the two windows could be used for AC. All I would have to do is get the spot up and running, add a kitchenette and see what happens. Worth the risk in my opinion. Somebody would pay $400 in this area to have his/her own space (think college student or recent grad, single guy looking for his own space, or single military). Worst case scenario, the unit rents out for $200 per month and I get my money back in 15 months ($200 x 15 = $3000). The key is to make the space seem as big and open as possible using bright colors in the same family, mirrors, and good lighting.

One more important thing to note: Commercial Real Estate is not Residential. In Commercial, the Value of a building is based more heavily on Net Operating Income (NOI = Income - Expenses) vs. Residential where the property value is based on comparable sales in the area. In this case, if I can generate more monthly income with this ‘extra unit’ (most would call an ‘efficiency’), then the Net Operating Income will also increase. Theoretically, this should increase the value of building. When I sell the building or refinance it, I can pitch it as a 9 unit building that generates more cash than previously advertised. It’s hard to calculate exactly how much more the building would be worth but we can try:

Capitalization Rate (Cap Rate): 7.5% (based on the market in this area)

Capitalization Rate in Commercial Real estate is used to determine the rate of return on an investment property. Usually, high value areas such as NYC or Boston will have a lower Cap Rate and more developing cities such as Detroit or Norfolk should have higher cap rates (more risk = more return)

Annual NOI: $3600

(Monthly Income – Monthly Expenses) x 12. ($400-$100) x 12 = $300

Value: ?

Calculation: Cap Rate = NOI/Value OR Value = NOI/Cap Rate

                         Value = $3600/7.5%

                         Value = $48,000

Remember, these calculations are all theoretical but even if I am half right, the income that this unit can generate could increase the value of the building by $24,000. One storage unit, the size of a bedroom could potentially increase the value of the building by $24,000!! This is why it’s always important to think outside the box and do to math. More details to come!

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

​Where do we begin? Many hear the words ‘Commercial Real Estate’ and immediately think “big money” “unattainable” or “only for a select few.” What I have learned over the past year is that NONE OF IT IS TRUE. Commercial Real Estate is as simple as this: find a deal, round up some funding, make an offer. Of course, there is more involved but the point is that anybody can do it. Let’s go over some of the details:

Finding A Deal

This is by far the most important part. In my opinion, it’s the most important piece of any real estate transaction because it’s the easiest way to mitigate risk. If we find a deal and make some mistakes down the line, then everything will still be OK. Real Estate has enough risk to begin with so it’s essential to find property at a low price with some good opportunity for growth. It lowers risk, decreases stress, increases the margin of error and generally makes for a good experience. Finding a deal could take two days or two years so the most important part is PATIENCE. I can’t emphasize how important this part is. Take your time!! It’s better to wait years and be right once then rush into a project only to realize that it is going to lose money. The second most important part to finding a deal is to know your values in the area. If you can see values of houses for $350,000+ and you can find something for $200,000 then you’re in the money regardless of what’s wrong with the property. If you purchase that property and after months realize that you in over your head then you can still sell to another investor for a smaller profit. Deals bring opportunities.

My Deal

The property that I purchased is located in Norfolk, VA and has 8 units (any property with 5 or more units is classified as commercial) with some storage space in the back. I had become aware of it a couple years prior but didn’t pay much attention because too much work needed to be done. In those two years, the seller rehabbed half of the units, changed the windows, fixed the siding and made other miscellaneous repairs. The property rents were under market value so there was an opportunity for better cash flow. The deal won’t make me a millionaire, but it was a low risk play, gets the foot in the door for future commercial deals, and gives me experience with operating on larger scale. My thinking is that it’s probably better to start with 8 units, learn it, master it, then move on to 20, 30 or 100 etc. The financing broker that I used was Stacksource (it’s online and very easy to use, check out stacksource.com). The property was already managed by Century 21 (who manages my other rentals) so it made for a very smooth transition.

Points About Commercial

The biggest difference between commercial and residential real estate is value. With residential, your home value is based on comps in the area. It means that even if you put add 7 bedrooms and a kitchen the size of Kim Kardashian’s to the home, your value will still only increase marginally, based on the close comparable properties in that neighborhood…and you don’t want your house to be the white elephant of the bunch. BUT, in commercial, you can increase the value just by increasing the Net Operating Income (NOI= Income - Expenses). For example, increasing rents means increasing value. Rehab a unit à increase rent à increase value of building. Even adding amenities like washer/dryer or adding a pet fee can theoretically increase the value. Decreasing expenses can also increase value. The reason for this is that investors looking to buy commercial properties truly care about one thing: cash flow. If your property is cash flowing more every month, someone will pay more for it. There is a calculation in which you can theoretically calculate a future value or sales price (Annual NOI/Cap Rate) but that’s for another day. If you want to started and learn more, YouTube Commercial Property Advisors and watch/listen to all of the videos. Without the knowledge from this, I was probably not buying any apartments in 2020. You can sign up go to the website, get important materials and even sign up to have a mentor.  

Today

The property has almost been fully stabilized, just looking to rent out the last unit. So far it has been a great experience and I look forward to expanding the rental portfolio. Purchasing a low risk, higher reward property is a good start to the commercial portfolio, but I plan to expand in the next couple of years. You should too.

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

Anyone who has ever bought or sold a house has come across an appraisal. Let’s look into why they are important and what they mean for you. By definition, an appraisal is the act of assessing something or an expert estimate of the value of something. In residential real estate, an appraisal is essential to knowing the true value of your home or future home. To become a licensed appraiser in Virginia, one must log at least 1,000 hours of experience and 150 hours of education before becoming licensed. In comparison, only 60 hours of online education and a test are what it takes to become a real estate agent in VA. An appraiser will come to a property, inspect the structure for upgrades, then look at comparable sales within a close vicinity to determine a value. This is completely different from a property inspection in which a licensed inspector goes through, above, and below the structure looking for issues. Another post will be done on why those are also essential.  

For The Buyer

An appraisal is something that you will pay for out of pocket, usually $400-$700 and is required on almost all transactions that have a mortgage. Lenders will typically require an appraisal because it confirms value and gives them the OK to give you a loan on the property. Cash purchases do not require an appraisal but I would always recommend getting one. Once completed, the appraiser will send it to the lender and they’ll send it to you. There are a lot of pages but there isn’t much important information except for the value. If the appraised value exceeds your contract price (the price that you and the seller agreed upon) then great! You now have some free equity in what is going to be your new home! You do not have to share this information with the seller or anyone else. If the value comes in at the contract price then great! Everyone is happy. If the value comes in LOWER than the contract price, then we may have a problem. In this case, your agent will have to inform the sellers agent of the low value and then the seller will be left with a decision: cancel the deal in total, fight the appraisal or agree to the lower price. Usually the seller will agree to the lower price because it’s very difficult to challenge a professional’s opinion and get the value increased. Also, if the appraisal is FHA or VA then it’s pretty much stuck to the property for 180 days.

Sellers/Owners

If you are selling your home then there is little incentive to get an appraisal. Most agents should know the value of homes in your neighborhood and if not, they have access to enough information to figure it out. If you own a home and are looking to refinance or take out a line of credit on the house then an appraisal will likely be required. Sometimes a homeowner will get an appraisal on his/her property just to know the value. We’ll see this in an area where there are not many comparable homes, or in a new gentrified area where values have increased significantly over the last few years. Remember, Conventional appraisals can change from one appraiser to the next but once a FHA or VA takes place, that value is attached to the property for 180 days regardless of how many more appraisals take place after.

If you have any questions about appraisals in general, don’t hesitate to ask!

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

After a lot of great feedback on the previous post, I thought that we’d get right back into credit. The two biggest takes from Part I are pay our bills on time and don’t come close to maxing out credit cards. Most of us know this and try to do it but the challenges we face today are unlike ever before. Despite that, let’s at least try do our best and continue to pay mortgages, car notes, lines of credit, students, and credit cards on time. In this piece, we will discuss the sweet spot for credit scores and a couple more tips that will save us THOUSANDS in the long run.

How do companies look at our credit (FICO) score?

As most of us know, the higher our credit score, the lower our given interest rate. Most companies, including banks, credit unions, lenders, and brokers look at our scores in margins of 20. Based on FICOs 300-850 scale, companies look at our scores within a specific grouping: under 600, 600-619, 620-639, 640-659, 660-679, 680-699, 700-719, 720-739, 740+…notice how I stopped at 740. Most of the time, if your FICO score is 740 or higher, your given interest rate will be the same (sorry to those who have 800+ credit). If your FICO score is a 680, generally you will get the same interest rate as someone who has a 699. If you have a 730 then you will generally receive the same interest as someone who has a 720 or 738. The higher the better but for some reason companies like to work in these 20-point brackets.

THE SWEET SPOT

This part is very important. You want your score to be 700+. There is a sweet spot for all companies and that is almost always 700. Anything under 700 isn’t necessarily bad, but you will be paying more for it. Car loans, home loans, and credit cards will all have considerably higher interest rates with a FICO score under 700. Now for some reason, if your score is 701, 719, 755, or even 805, the interest rates aren’t too far apart but there is big shift once the score is under 700. Don’t kill the messenger, only sharing what I’ve learned.

How mortgage companies look at our credit

All mortgage companies look at our credit score the same: They pull one FICO score from each of the 3 credit bureaus, Experian, Equifax, and Transunion (see previous post for more info) and use the middle of the three for your mortgage credit score. For example, if your scores are: Experian 678, Equifax 704, and Transunion 692 then the mortgage company will use the middle score (Transunion 692) as your qualifying score. If you are married or applying for a home loan with someone else, then the lower middle score of two applicants is used. Let’s try an example:

Applicant A       Applicant B

Experian           710                   642

Equifax             715                   666

Transunion        731                   651

Which score did the lender use? If you guessed 651 under Applicant B you are correct. Applicant A, good job in keeping your score over 700 but in this case, it means NOTHING. The mortgage company will use the credit score of 651 if two people are applying for a mortgage loan together. It doesn’t matter if your score is 850, the mortgage company will always take the lower of the applicants. The moral of the story is let’s keep our credit score over 700.

I will be doing a at least another part on credit because it is that important. For further questions please contact me directly as I have seen thousands of credit reports and personally applied to at least 25 mortgage lenders.

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

There is a lot to say about credit. The United States economy is based on credit and ability to pay back loans. Your home, car, student loans, credit cards, appliances, even utility bills can involve a credit check. Why do companies do this? To make sure that you not only pay your bills, but that you pay them on time, every single month. What they don’t tell you is that it’s an intentionally complicated system based on FICO (Fair, Isaac and Company) in which your credit score determines how risky of a consumer you are. Pretty much, if you don’t pay on time then your score goes down. If you pay all of your bills on time then you will get better, lower interest rates and save thousands in the long run.

The Players In the Game

There are three credit bureaus responsible for reporting your score: Experian, Equifax, and TransUnion. One main reason why your score is different with each is because most businesses don’t report to all three. Let’s say you buy a new car and use a local bank for financing. That bank may only report the debt of your car to Experian but not the other two companies. This will change your score with Experian but not the other two. There are other factors involving your FICO (credit score) and if you’d like to learn which types of companies use which versions of FICO, click here (https://www.myfico.com/credit-education/credit-scores/fico-score-versions), but let’s stick to the basics.

Pay On Time

LATE PAYMENTS ARE 35% OF YOUR CREDIT CALCULATION. YES 35%. Simply stated, don’t miss payments. The payments that are included on your credit report are mortgages, lines of credit, car loans, personal loans, student loans, credit cards, and almost anything that you must pay back to a company with interest. In the last few years phone financing, appliance financing, and electronics financing have been added onto our credit reports. Pretty much everything is on credit! 1 late payment (when you are 30 days past the due date) can drop your score 50-100 points. That could drop you from a 750 to under 700 or worse! This has huge implications when buying anything else on credit.

Credit Card Usage

Credit usage is almost ONE THIRD of your credit score calculation. This means that companies want to know how much of our available credit we are using. If you have a credit card with a $1000 limit and you typically hold around a $700 balance on the card, that means you’re using 70% of the allowed credit. When calculating our credit score, this isn’t good. For some reason, having over 30% credit usage on our credit cards is seen as more risky to companies and therefore can hurt your credit score. Try to keep that balance on your $1000 credit card under $300 (or 30% of the $1000). To find out your ratio on each card you can divide the balance but the limit. If you owe $2500 on $7500 limit credit card, then your ratio is .33 or 33%. It’s also important to know that the 30% sweet spot only concerns revolving debt (aka credit cards and lines of credit) so your mortgage, student loans, car loans, etc. are not affected.

In the end, if you pay all of your bills on time and don’t max out your credit cards, you score will remain over 700 and you will always have the credit advantage when looking to make purchases. Look for my next blog post as I will get more detailed into other credit sweet spots, how mortgage companies view credit and some tips for staying ahead of the game.

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

A topic as old as time. Do I rent or do I buy? Some people believe that renting is the better decision: all you have to do is find a place, sign a lease, and send the check. Seems easy enough, right? If you don’t like your current spot, you can just wait 12 months and find a new one. Could be the perfect fit for someone who is on the go, moving up in his/her career or who just doesn’t want the obligation of a mortgage…mobility and flexibility are keys to the world today. On the other hand, why not buy? Own real estate, own a piece of earth, have your money work harder for you. Few things in life feel better than stepping into your first house that you bought with your own money. I have been a tenant 7 times in my life and personally prefer buying but that does not always mean it’s the right decision for you. Let’s compare:

Renting

Having to pay rent and utilities is simple enough on the heart and the pocket book. If there are issues, usually you can call to have them fixed without spending extra cash. In a large city where property values are high, it may not make sense to buy a house. The median home price in Boston, MA is $418,000 but in Rochester, NY it’s $150,000 (one of the reasons why Rochester market is HOT). Would it be worth the risk for a young family to purchase a $400,000+ house in Boston? What if the family has to relocate because of work? Maybe they could sell but it costs money to do that. Maybe they could rent it to someone else but would it be profitable? Also, eventually there will be costs involved whether we like it or not. Someone has to cut the grass and eventually something will need to get fixed. In a place like Boston, one could pay rent and not have to worry about additional costs or predicting the future because most leases last 12 months. Worst case scenario, one could always sublease if one has to move quickly. In a large city, if you are concerned about unknown costs it makes more sense to pay the lease and use your savings to enjoy the surroundings.

Buying

I have lived in Buffalo, Rochester, Cleveland, and Newport News. One thing these places have in common is that the median home price is under $200,000. For this reason alone, I have been more inclined to buy. You get more house, more land, don’t have to worry about noisy, wall-to-wall tenants, bad landlords or increases in rent. The payments are reasonable compared to larger cities. Using our example from above, in Rochester, my monthly mortgage payment would be around $1000 (with taxes and insurance included). In Boston it would be around $2400. That’s a difference of almost $17,000 a year! It’s true that if you’re living in Boston, you’re probably earning more than Rochester, but cash is cash. In the areas where housing is more affordable for purchase, it might make more sense to buy. Just about anywhere in the country, you can rent out your 3bed/2bath house to someone else for at least $1000 which makes these areas great for home ownership and flexibility.

Verdict

There is no right answer to this question. Learn the area that you live in and understand your situation. That way, you can make the best decision for you and your family. If you’re living in New York City and want to buy then look to New Jersey where values aren’t so high. If you’re living in Birmingham then it may be time to look for a house. If you’re relocating to a new area, my best advice would be to rent for the first year until you can learn more about the area (towns, schools, subdivisions, routines, etc.). If you’re not sure about what to do then contact me with questions.  Purchasing a house is a huge decision and if you’re not sure, then the least risky thing to do is sign another lease.

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

Taxes, Insurance, and HOA.

Don’t forget about these! If you decide to put down the minimum 3% on a $250,000 house then your mortgage payment will be $1089. In addition, you will be required to pay property taxes and homeowners insurance (most first-time buyers include it in their monthly payment). Your annual taxes could range from $1000-$5000 and your insurance could be anywhere from $750-$4000 (based on a $250,000 house). If we take the averages from each, taxes and insurance could add another $400 to your monthly payment. Now we are looking at a total monthly payment of around $1500! That is a big difference in your monthly expense.

Also, if you are looking for a condo or townhome, don’t forget about HOA (Home Owners Association). Almost every condo or townhome community has a HOA and it will charge you fee. My townhome HOA in Newport News charges me $125 every month.

Get Pre-Approved

Once you’ve spent some time looking on Zillow for new houses, it may be time to call your agent (me) and get serious about buying your first house. The call will go something like this: (You) “hey Chaz, I am ready to make an offer on a house.” (Me) “are you pre-approved?”

It makes little sense to make an offer on a house without a pre-approval because it’s one of the first things that sellers ask for. Go to your local bank, credit union, or mortgage lender and get that letter! You can also do it online or via phone but with something as important as buying a house, I recommend that you sit down with someone, get a feel for them, and ask questions. That way, when your house under contract and your loan is in process, you have someone to check in with. Pre-approvals will tell you how much you can afford and also check your credit. If you want to bring your paystubs, w-2s and bank statements that wouldn’t hurt either.

Rate Shopping

Everyone wants the lowest rate possible. As a lender I used to hear, “Oh I saw 2.5% online, why can’t you offer me that?” “Well Sir, maybe that was for a car.” Rates today are fairly similar from company to company but it’s worth looking around a bit. Most would recommend that you look at three different companies before making a decision on your rate. Personally, I believe that rates are important but service is equally as important. Once you make an offer and the seller accepts, you will have to wait at least a month for the deal to close and the loan to process. That period of transition is busy and usually high stress so make sure that your lender/loan officer picks up the phone and is communicating on a consistent basis. When I worked at Quicken Loans 8 years ago, if we didn’t respond to a call within 24 hours, after the third time our jobs were in jeopardy. I am not saying that the lender should be available every second but he/she should be professional and dependable.

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

Millennials: we are here and we are ready to buy. Even during the coronavirus quarantine, I have spoken with people all over the country under the age of 40 looking for a house. In fact, almost 2 of every 3 buyers is between age 18 and 40 (millennial age range is 24-39). While millions will continue to rent for various reasons, the injection of youth to the housing market will continue. So, for your first home, what should you look for? A house? What if you live in a city? Do you have kids (yet) or pets? Do you need to save for a massive down payment? Here are 3 basic tips to get started:

Down Payment

While you may think that 20% down is a good idea, think again. The median home price in the United States is about $250,000 so a 20% down payment would be $50,000! No thanks. Today lenders around the country are offering at little as 3% down. Take full advantage of the programs available and put down the minimum amount possible. Once you purchase the home, you can pay it off faster on your own terms or even refinance it but with the unpredictable world today, keep your cash. One other thing to note is that each state or city may offer special loan programs. I have seen programs that offer to pay the down payment for you, provide tax abatement or even provide closing cost assistance. As local lenders about programs or just search on google before deciding what loan to choose.

“Flexible/Versatile House”

This is very important. Chances are your first home will not be your last. Use this as an opportunity for you to learn about being a homeowner, maintaining a house and eventually moving to the next.  If you want to move after a couple years or more, then you will want a flexible situation. This means that you should be able to rent out your home or sell it fairly easily. 3 bedrooms, 2 bathrooms and decent neighborhoods will always have renters and buyers so keep that in mind. My first house was a 3/2 townhouse that I still currently rent out. The three-point stance of living in, renting out, and selling your home will always give you the versatility necessary for the fast-moving world today.

Credit

I am going to do a full post on credit but let me just say this: If your credit is under 620, don’t buy. Lenders will take full advantage of your low score and tax you through the roof! On a $250,000 home you will pay at least $200/month more versus a 740+ credit score. A low score affects home loans, car loans, credit cards, even a phone bill. The United States economy is based on credit (ability to pay back your debts) so a low credit score will result in higher interest and higher payments. Instead, learn about credit, get Credit Karma or another monitoring app, and get your score over 700. Credit has become more important every single year so do not fall behind on this. If you have questions you can contact me directly as I have 5 years’ experience in home lending and have seen over 1000 credit reports. 

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.

Everyone wants to flip a house these days. Seems simple enough after watching Fixer Upper, Flip of Flop, or Property Brothers. And the truth is flipping a house is not that difficult to do. All you have to do is find a house at a discounted value, make the necessary upgrades and sell it at a reasonable price. Seems simple right? The process is very simple but not easy.  The details are rarely talked about in depth and that leaves us with many questions: how do I find the right house? how do I know how much money it will take to sell? How do I know that there are not problems with the house? How do I find a trustworthy contractor to work with? What color should the paint be? The questions go on and on…

In future posts, I will answer all of these questions,  but lets start with the most important piece to completing a successful flip. I live by a simple saying: THE MONEY IS MADE WHEN YOU PURCHASE THE HOUSE. It seems a little backwards but it’s true. In order to have a successful flip I would advise to work backwards. Follow me here: ARV – Repairs – Cost to Sell – Carrying Costs – Expected Profit = Maximum Purchase Price. Basically, the first thing that you want to do is determine the ‘After Repair Value’ (ARV). How much can you sell the house for once all the repairs are completed? This number can be determined by looking at recent, comparable sales in the neighborhood and seeing what they sold for (we will go into recent comparable sales in a future post). This calculation is the most important in house flipping because not only can it determine how much you will make but also it will determine how long it takes to sell your new, beautiful, piece of property. Before I started flipping for myself, my job at a company was to find houses, determine the After Repair Value, and estimate repairs. This can take some practice before getting it right. The good news for you is that you don’t have to be perfect, you just have to be conservative. My best advice would be to underestimate the ARV and overestimate all of your costs (repairs, selling costs, carry costs, etc). This in effect will lower the maximum price that you can purchase a property for and mitigate most of your flipping risks. Lets look at an example:

You found a house that your friend wants to sell quickly, but there is some work that needs to be done so you go over and take a look. Let’s call the property 24 Chaz Drive. After researching recent sales (properties within .25 miles or .5 miles), you determine that if you flipped 24 Chaz Drive, the ARV would be $240,000. I will add traditional estimates for the rest of equation:

ARV                                          $240,000

–  Repairs                                   $50,000

– Cost to Sell                              $25,000

– Carrying Costs                          $5,000

– Expected Profit                        $40,000

 = Max Purchase Price              $110,000

So, $110,000 is the maximum amount that you can pay for the house. But what if something goes wrong? What if the repair costs are more than expected or the house takes longer to sell? The truth is, we don’t know exactly what can happen. Sometimes the numbers are right on point. Sometimes a pandemic comes and changes everything. In order to cover as much risk as possible, I would reccommend that a first time flipper takes a more cautious approach. That starts with an less aggresive ARV and finishes with the patience to find the RIGHT deal. Lets use the same example but with a new flippers approach 

ARV                                          $220,000

–  Repairs                                   $50,000

– Cost to Sell                              $25,000

– Carrying Costs                          $5,000

– Expected Profit                        $40,000

 = Max Purchase Price               $80,000

Now based on your professional calculations, the ARV is truly $240,000 and you are confident in that because two houses of the exact same square footage, beds, baths, and upgrades sold for about $240,000. You went on zillow and saw that 8 Chaz Drive sold for $237,000 last December and 33 Chaz Drive sold for $243,000 in March. BUT, you are a new flipper and can’t possibly know exactly how much it will take to repair or sell the house. Pricing out the ARV conservatively gives you extra breathing room for these unknown numbers and possible issues that could take place during your process. Simply stated, offer a low price and you will eliminate risk. It’s very possible that your friend won’t sell for $80,000 but that’s OK. Be patient, and move on to the next opportunity. 

Let me know what you think about the post by emailing me at cfiscella@century21nachman.com or my Instagram @chazrealestate. Make sure to keep checking out listwithchaz.c21.com for new content as well as my Instagram for videos.