Resale value after renovation, minus the renovation, minus the holding cost, minus transaction costs on both ends, minus the return the capital requires. The asking price is not an input at any point.
This is the part that surprises people, so it is worth putting first. An investor’s offer is not a percentage off asking. It is not 70% of anything. The asking price does not appear anywhere in the arithmetic.
That is why 2 houses on the same block with the same asking price can receive offers $30,000 apart, and why arguing about the asking price rarely moves an investor’s number. What moves it is a change in one of the 5 inputs below.
Not what the house is worth today. What it will sell for once the work is done, established from recent sales of comparable renovated houses nearby: same block where possible, same style, same bedroom count, same lot. This is the single largest number in the calculation and the one that most affects the offer.
It is also where a seller has the most legitimate room to push back. If there is a renovated comparable sale we missed, that is a real argument and it changes the number.
Everything from the roof and the mechanicals down to the paint, plus a contingency, because renovations on older housing stock reveal problems that were not visible on day one. Knob-and-tube wiring behind a finished wall, a rotted sill under new siding, a cesspool that was never on any drawing.
Sellers rarely count 2 items as renovation cost. The first is the cleanout. On a full house it runs into thousands of dollars and several days before any work can start. The second is legalization: an unpermitted dormer, a converted garage, a finished basement that appears on no filing. On Long Island in particular, resolving open permits or a certificate of occupancy problem can cost more and take longer than the physical work.
Taxes, insurance, utilities and the cost of the money for every month the property is owned. On a house with a 6-month renovation, this is a meaningful number, and it is the reason an investor cares about the timeline as much as the scope. A property that will take 12 months to permit is worth less than one that will take 4, even if the construction budget is identical.
An investor pays closing costs on the purchase and again on the resale, and on the resale side that includes the commission to the agents who sell it. These are known, unglamorous, and they come off the number before any profit is counted.
Whether the money is a lender’s or the buyer’s own, it has a cost and an alternative use. A deal that does not clear that threshold does not get done, not because a buyer is being difficult but because the capital goes somewhere else.
| What it sells for after renovation | $780,000 |
|---|---|
| Minus the renovation | −$190,000 |
| Minus holding: 6 months of taxes, insurance, utilities and interest | varies by house |
| Minus transaction costs on the purchase and the resale | varies by house |
| Minus the return the capital requires | not published |
| The offer | what’s left |
Because a seller is usually comparing it to the wrong thing. The natural comparison is the renovated house that sold down the street for $780,000. The correct comparison is that number minus the $190,000 of work it took to get there, minus 6 months of carrying it, minus the costs of buying and selling it twice, minus the return on the money.
Run honestly, that arithmetic produces a number well below asking on a property that genuinely needs work. It is not a negotiating position and it is not an opinion of the seller. It is what is left.
And it is worth saying plainly: for many houses, listing on the open market with an agent produces more money, and the seller should do that. The cash sale is worth considering when the house cannot be financed as it stands, when the seller cannot or will not do the work, when a cleanout is the blocker, or when certainty and speed are worth more than the difference.
The categories above are how any competent buyer builds a number, and there is nothing proprietary about them. What we do not publish are our specific assumptions: our cost-per-square-foot renovation bands, our contingency, our return threshold. Those are ours, they vary by property and by market, and a number is not more persuasive for being accompanied by a spreadsheet.
What we will always do is give the number in writing before asking anyone to open the house, and explain which of the 5 inputs is driving it if you ask.
Send the address and you’ll have it in writing by the end of the next business day, with proof of funds. If you ask, we’ll tell you which input is driving it. If it isn’t a fit, you’ll hear that on the same timeline.
Goes to offers@investngroup.com. Selling your own house? Start on the homeowner page.