What price should I list my property for? Jordan Brewer
The most important number you will get from the property evaluation conducted on your property before you get your loan is the After Repair Value (ARV). This is the estimated price the property will be sold at with a 90-day market time. We recommend listing your property at the ARV established by your property evaluation.
The person buying your property will likely be using a traditional lender that will take 2-4 weeks to close from the time you get it under contract. This means that if you took 60 days to rehab your property, you really only have about 60 days to get your property under contract before your initial 5-month loan term is up. That is not a lot of time and that is the important thing to remember. Time is money.
We do not have a prepayment penalty, so the faster you sell your property the less interest you will pay and the more profit you will make. If you sell your property in 30 days, you will save 5-6 percent of your loan amount in interest that will go straight to your profit.
For example... let's say that you brought the following deal to us for funding:
Purchase Price: $100K
Rehab Costs: $40K
Loan Amount: $168K
ARV: $240K
If you take 2 months to rehab the property and 3 months to sell the property for the full $240K, you'd make about $54K in profit.
However, if you take only 1 month to complete the rehab and if you reduce the price by 5% to sell the property in 1 month for $228K (a 5% price reduction of $12K), you're NOT getting $12K LESS in profit. This is because you're going to SAVE THREE MONTHS of interest since you've already paid for 5 months interest. On a loan of $168K, three months of 1.5% interest is worth $7,560. Subtract that from your price reduction of $12K and you're only getting $4,440 less in profit. Just remember that every day the house is on the market COSTS you money... and every day sooner than 5 months that you sell the property SAVES you money.