How To Compute Your Numbers In Real Estate

https://www.jayconner.com/how-to-compute-your-numbers-in-real-estate/

Every deal has a gross profit and net profit. Watch this short video and let Jay teach you how to properly calculate your numbers in real estate.

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Jay Conner (00:00):

So, here's a question sent in today by Mark Broyles. Mark, couldn't be at the event, but I got your question here. So your question here says, Oh, this is a really good question. When figuring, Hey, Chaffee, you get to answer this question. All right? Make sure you don't go to sleep. All right. When, here's the question Chaffee, when figuring your numbers, that being your purchase price and the after repaired value, does the maximum loan to value of 75%, also take into account the interest paid to the investor or private lender and the real estate fees to the realtor community to sell the house? The after repair value $200,000, purchase and repairs at no more than 150, in other words, the ARV is 200, but we're not going to borrow more than, the ARV is 200, and we're not going to borrow more than 150. The question is, does the interest, and in other words, does the $50,000 profit on that scenario? Well, actually, Mark, we don't know what the profit is, because you're, okay. I'm sorry. Back up. Chaffee, the ARV is 200,000 and the purchase and repairs are no more than 150,000. So let me just give that some color Mark, when your question, you're going to buy it. And the, let's say you buy it for a hundred and the repairs are 50. So your purchase and repairs 150. Does the interest and realtor fees, in other words, is the $50,000 profit Chaffee reduced by interest carrying costs and realtor fees.

Chaffee-Thanh Nguyen (02:05):

So, not quite sure I enter the question and you're going to borrow a maximum of 150 and whatever the purchase price, the difference between the ARV and the purchase price or what you borrow on the purchase price. Let's say you buy it for a hundred, right? So, you got 50 left. Well then, if the repairs are 25, you got 25 left. Well that 25 can be used for whatever you want. So, it could be used for carrying costs. It could be used for the interest. It could be used for marketing of the property that's yours. And then, once you actually sell the property, say you sell for 200, well, then you have to deduct all their fees and then, you know, 200 minus the fees and whatever, that's your profit. So, I'm not sure, not only,

Jay Conner (02:55):

Yeah, that's right. So, Mark, you can unmute yourself. I want to sure. I get your question answered correctly. So we really have two categories of numbers here. One category of numbers is a balance sheet number and another category of these numbers are profit and loss. So, let me bring that down nice and simple. When you got an After Repaired Value of $200,000, and you're going to borrow a maximum of 75% of the ARV. Then, you're borrowing a maximum of $150,000. That's a balance sheet item. So that, so if you're borrowing $150,000 in the ARVs 200, that has nothing to do with profit and loss, that's just a matter of how much you're borrowing, right? That private lender note is a liability. Okay? Your property is the asset. So the profit and loss statement, let's say back to you, what your facts are here. You've got a $200,000 ARV for purchase. I mean, ARV and the purchase and repairs are no more than 150,000. To calculate your profit, yes. The answer to your question is yes. Boy, didn't that take a long time. So yes, you have to subtract from the 50, that's gross profit. So, you got gross profit and net profit. So every deal's got gross profit and net profit, the gross profit on this deal, if you're just looking at purchase of 150 repairs of 150 and the ARV is 200, yes. You have to subtract the interest and the fees from that $50,000 to come down to your net profit, on that deal. Did that answer it Mark?

Mark Broyles (04:57):

No, that actually did answer it. I know it was a convoluted question, but I understand exactly what you're saying now. I appreciate that.

Jay Conner (05:06):

I hope my answer wasn't convoluted.

Mark Broyles (05:11):

I appreciate that. That definitely answered it.

Jay Conner (05:14):

All right. Very good.