Need help on a deal. - Posted by tom nunes

Posted by SueC on July 05, 2001 at 13:51:06:

If your comps and repair estimates are correct then the “standard” formula for determining your max offer to flip is $125K x .7 - $5K = 82,500 for your MAX offer (not your starting offer). Some people modify this depending on the area or market temperature to only deduct $20K or 20% for profit/holding/misc so $125K - $20K - $5K = $100K. If you are flipping then you should probably go with the lower numbers since you want to make some $$ and so will your buyer. You are right that this deal looks a little thin to flip esp. if you are off on the repairs or if the property isn’t really worth a $125K ARV. It sounds a little non-conforming with the 4th BR being a garage, etc. so that’s something to think about too.

Do you just want to flip? If it only needs $5K of work to make it worth $125, why not take it subject to for $1,000 to seller, make their payments and resell on a L/O to a buyer for $130K? Or “pay” your buyer to do the work by selling to them for “only” $125K plus their repairs (of coure approved by you and done in advance of them moving in). Just a couple ideas off the top of my head.

Need help on a deal. - Posted by tom nunes

Posted by tom nunes on July 04, 2001 at 22:15:02:

Hello CREONLINE,

I need help on an issues.

I met with a seller today.

The discription:
4/1, 1249sqft, (actually a 3/1, ~900 sqft with garage converted to a bedroom) in older area of town.

The numbers:
1st mort = 91K.
comps = 125K.
spread = 34K. (without repairs, upgrade, cleaning, painting)

repairs = ~5K.
reduction = 12k (for fast sale)
to seller = 2k (for travel $)
profit = ~15k.

The inspection:
It was totally overgrown; front and back. The house could use a coat of paint -inside and out- some major yardwork, (has all the trimmings from last 20 years in the back yard with 4ft tall grass surrounding it) gutters. The roof looks like it has 2-3 years left on it. The backyard has THREE sheds and an old car in the corner that need to be removed. The doors and windows look old but workable. I didn’t do a thorough inspection but can arrange this at any time. They are living there but want to be out in a month.

My gut feeling:
I think the deal is too skinny to work. They are happy with just getting the first paid off and some money (1-3K) for traveling money, so that is not an issue. I think it would take 5-10K in work to get it on the market at comps. I don’t have the funds to do this. Then I would have to further reduce 10-15% for a fast sale. I was thinking of getting it under contract for 30-45 days and trying to flip it to a rehabber as a “fixer”. I pointed this out to them and they were OK with the idea.

Can anyone advise me on this. I would appreciate any input on keeping/repairs and on marketing/flipping to rehabber. Please be specific. =o)

Thanks in advance,
Tom Nunes
tanunes_us@hotmail.com

Re: Need help on a deal. - Posted by Ronald * Starr

Posted by Ronald * Starr on July 05, 2001 at 21:23:05:

Tom Nunes-------

Be sure your estimated fair market value is good. Get good comps from a title company or MLS or both.

It is possible that the city has a big lien against the house for inspections. Check the title situation before going forward.

I don’t do skinny type deals, so I’m not going to advise on that. The “subject to” and “lease/option” investors need to respond to help with this one.

The Sacramento R. E. Market is hot, so reselling should be easy.

Good Investing************Ron Starr************