Here's the numbers - Posted by Jay (OH)

import · June 25, 2001, 6:51am

Posted by JT - IN on June 25, 2001 at 08:25:21:

Jay:

The realvance of what the bank paid at Sheriff Sale, may not be a true reflection of what they have invested in the loan. Conversely, what they have invested, has no bearing on FMV, (fair mkt value), or ARV, (After repair value). The 26K that thye paid at SS will likely represent the 2/3rd of court appraised value, (appx 39K), whcih may be where they are getting their info for mkt value, which is again, a bunch of hooooy.

I think that you are on the right track with the 20K number. Make the offer, and when they counter, make that same offer again. And when the counter, amke the same offer again; you get the point. Get the idea accross to the bank that that is what you are willing to pay for the property. Based upon the description of market activity, (non-existent), I think you may be in the driver seat here.

Now, the ever important exit strategy. This means, how and when are you going to fix, sell, profit, etc. on this profit. Think your strategy through completely, as if you already own this property and are now going to fix, sell, etc. Map out your every move, in detail. Now if there is any detail that you cannot clearly see, (visualization), then youneed to be answer that dilemma, before you proceed, to purchase this property. Kind of like fast forwarding the situation now, instead of waiting until you own the property, or problem, then realize that there is something that you have overlooked.

Good Luck.

JT - IN

import · June 25, 2001, 6:51am

Here’s the numbers - Posted by Jay (OH)

Posted by Jay (OH) on June 25, 2001 at 06:51:37:

Well I met with the realtor Saturday. The house is a REO and is listed for 39,900. I discovered that the house was bought back for 26k in December 2000. The house is a 2bdrm/1ba with full basement, and detached garage. I would say the house needs about 10k in repairs, maybe an overestimate. The comps for the area are 46k. Is this a good deal? What should I offer the bank? I want to offer the bank 20k. I’m missing an exit/strategy because I’m not really sure what an exit/strategy is, please help. The house has been on the market since March and I was the first person the realtor even showed the house to.

Thanks.

import · June 25, 2001, 3:53pm

Re: Here’s the numbers - Posted by Ronald * Starr

Posted by Ronald * Starr on June 25, 2001 at 15:53:36:

Jay (OH)-------------

Is this a good deal? Well, that is a subjective decision only you can make. You’ve gotten some good suggestions already. Let’s see if I can add something for you.

Lets look at the number:

$46K value when finished
-2.5K Real estate agent commission
-10k fix-up costs
-2K costs of holding, approximately, for 5 or 6 mos
$34.5K remaining
-2.2K contingency,overruns,unexpected costs 15% X Costs
$32.3K Sales price less expenses
-20.0 purchase price
$12.3K Profit.

Is this enough for you? If not, lower the price. For the amount of work, I would not be satisfied with that profit. But you might be. Try to estimate how much time you will be putting into this deal and divide into the profit–after income taxes–to get your $/hr rate. Also, consider what might be available in other properties. Could they offer you more?

Never get enamored of any one deal. This is a numbers game, or rather business. You want to see lots of properties so you can pick out the very few that will give you very good profits. If this is not the one for you, so what? You just go on looking for something better.

Gee, I feel like I’m Johnboy, doing all these numbers.

Good Investing and Good Figuring*Ron Starr

import · June 25, 2001, 8:31am

Re: Here’s the numbers - Posted by Merle E Woolley

Posted by Merle E Woolley on June 25, 2001 at 08:31:15:

Good morning, Jay …

I have probably missed your posts where you describe what you do … lnaldord, L/O, rehab, etc. That would be very ipmortant in advising you of a good exit/strategy.

In our area, most older 2-bedroom homes are appreciating at about 3% to 4% per year. If that were the case for you, this property might be worth about 27,500 today. But then, did it need $10,000 in repairs when it sold? That, too, could affect its current value.

Who did your comps? Are they telling you that someone “stole” this house in 1999? If it sold then for $26,000, the loan would not likely have been for more than that. If it was $26,000, add Realtor fees and foreclosure costs, I doubt that would add up to $39,000.

What have you done with previous properties you purchased? Obviously, to flip this means you have buy at a lower price than if you will L/O.

I’ve posed several questions, but these and many more should be addressed before you make a serious offer on any property. I get phone calls all the time from folks who purchased property without enough plannin and forethought. Invariably, they overlook important issues and end up in trouble.

The most important thing you can do in this business i to lay out your business plan FIRST! Know or sure what you plan to do with anyting you purchase. Build in a couple of alternatives … just in case. Only when you know what you will do with a property can you make an intelligent decision about te price you will pay.

Today, we base every buying decision on what we know will be our selling price, down payment and monthly payments to receive. We know approximately what the holding time will be (based on almost 17 years experience). We did not know all this in the beginning, but by reading everythign we could find on rela estate investing, we establihed some parameters. Plenty of research willprodce most of the information needed … but, you have to sort thru it to find the “good stuff.”

Hope this stirs some thought and helps you with this decision.

Remember to … enjoy this day … TODAY!!
Merle