When trying to decide what type of foreclosure is a good one, you need to evaluate the cost of the property to it’s estimated value.

For example.

If a foreclosure is worth $200,000 after repairs, then the asking price can be no more than $130,000.  This is because hard money lenders will only allow you to borrow 65% of the ARV (after repair value).

$200,000 x .65 = $130,000

However, if you need construction costs to be included, then you need to deduct that amount from the $130,000 and that amount will be your offer.

So, if construction repairs is $20,000, then:

$130,000 – 20,000 = $110,000

You should only offer $110,000.

If you have repair money and do not need to borrow towards it, then $130,000 is a good enough offer.

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Filed under: Foreclosures

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