I would question why your seller is willing to leave $40,000 on the table for you. He says it appraises for $145,000 after repairs, but without your due diligence you don’t know that.
This being your first deal, do you have the expertise to know what repairs cost and what actually has to be repaired. Your estimate of $10,000 could be way off.
I would not do this type of a deal for my first one. Or if you do, I’d partner up with a carpenter type so that he may give you a better idea of repair costs. Your seller might be seeing you as a new investor. Read Joe Kaiser’s new piece in the How To Articles section of this site.
I am trying my first deal. I have an appointment in over an hour to meet with an ex-landlord who is selling a 2 unit, older, 2-story house that he says appraised for $145,000 after repairs, needs about $10K in work (my guess so far), and he’s asking $95K.
I just want to know what strategy would work best with a house like this, if all #'s are accurate, and what I should say to him.
I’m nervous, because I’ve never done a deal, but this sounds like a good start. Does this sound like a good plan:
*Offer him a 60 day option to buy the house ($100 good faith)
*Tell him that if I find another buyer within 60 days, whatever profit I make upon selling it, I will split that
profit with him, thus giving him more than his asking price for the house
ex: Asking price: $95K
My buyer’s price: $110K
Profit: $15K-1K misc. expenses ($14K total)
He gets $7K + $95K= $102K total
I walk away with $7K.
Ok. Be cautious as Phil says, but don’t bee to sceptical. Just because it sounds too good to be true does not mean you should throw the baby out with the bath water. For example, last week a man called me and told me he had had been referred to me as a guy who buys houses, told me he was $4500.00 behind on his payments on a house that was worth 210,000 but was owing 175,000.
In my particular area there are a lot of High mortgage (overmortgaged properties) and I thought this was one.
I did my research and signed with him the next day. Turns out that house only had $170,000 left on the mortgage, that the guy just wanted to walk with his arrears paid and with about 10,000 worth or reno’s the prop is conservatively worth $250,000 - So be skeptical but don’t be fooled, there are tons of great deals out there.
Best approach is to check around the neighbourhood, ask realtors (use your gut, it usually doesn’t lie). If you feel a bit awkward and you do it just cause you need the money…don’t do it.
Ok. so supposing your figures are correct. Here’s what I would do
get an option…you can get the financing, even if you have bad credit @75% (75% OF 145,000 = 108,750).
Pay him the 95
Do the 10 in reno’s
put 3,750 (less closing costs? depends where u are)
in your pocket.
Market…wrap it, lease it, do a “subject to” the prop is now yours.
Get a partner to help you. Give him 5k deposit and put the 10k into reno’s…then finance and flip or just flip.