Answer to Question #167249 in Economics for James R.

Question

Real Estate Question

How do you calculate the Maximum Purchase Price of a property?

Answer 1

MPP = Sales Price – Fixed Costs – Desired Profit – Rehab Costs, where:

Sales Price equals the conservative estimate of what I can sell the property for.

Fixed Costs equal all the costs, fees, and commissions that I can expect to pay during the project.

Desired Profit is the minimum amount of money I want to make off the project when it’s complete.

Rehab Costs are the material and labor costs required to rehab the property into resale condition.