Bidding on real estate is the key to being a successful investor. Many investors bid low to see if they can get a home cheap. It’s just like you or I going out and bidding on Apple stock for $100.00 when it trading at $300.00 per share. (Just plain silly)
Our Clients use current market data to assess the good deals from the bad ones.
A simple method we have come up with and used for years is the “CCCCR” Four C’s and a R.
The expenses investor will incur are as follows:
Let’s assume we purchase a HUD Home for $50,000 and sell five months later for $100,000.
C -Closing Cost when You Purchase (Let’s use $3,000)
C -Closing Cost when You Sell (We’ll use $2,000)
C -Carry Cost while You Hold Property (1,000 x 5 Months= $5,000)
C -Commission paid out when you sell (5% x Sales Price = $5,000)
R -Remodeling cost to bring up value. (Let’s estimate $12,000)
Expenses ( Add C’s & R Together) $27,000 in Expenses
Spread (Take sales price $100,000 and subtract from purchase price $50,000) $50,000 Spread
Finally, take Spread $50,000 and subtract Expenses $27,000 for TOTAL PROFIT $ 23,000