Posted by Stew(NE) on March 11, 2003 at 22:39:34:
I am in the middle of two gurus (Ronald and Joe). I’m sorry Joe. You are so far ahead of me in your thinking and negotiating skills. I am sure Jim could do better if you helped him out. But I was just thinking that if he could get the 10K and he has taken in to account all the expected costs and added in some leeway for mistakes, he should take it, instead of waiting for that 35% deal. But, I stand corrected.
What am I leaving out? - Posted by Jim, Omaha
Posted by Jim, Omaha on March 11, 2003 at 10:08:54:
First of all thank you to everyone that posts on this site, most everyone seems to give great advise that helps us newbies! Here is my situation: I have cash savings and good credit. My goal is to buy properties to rent out to create cash flow. I?m looking to do a couple of rehabs first to build some capitol so I am not tying up my savings.
The property I?m looking at is in an older but decent neighborhood, this house in good condition would sell for about 90 to 95k
There is an RE agent involved, there is a divorce involved and the seller is starting to get behind on payments, according to the RE agent the seller is very motivated. The house is partially renovated but needs about 10k to finish.
RE agent said they are asking 75k but would consider all offers.
Here is how I run the numbers; I estimate 6 months total for rehab and sale
90,000 sell price
6,300 7% RE commission for sale (if I do FSBO I pocket this, I?m trying to plan for worst case)
1000 closing cost for purchase
300 insurance (6 months)
600 taxes (6 months)
600 utilities (6 months)
12,000 rehab cost (I added 20% for cost overruns)
10,000 my profit
30,800 total expenses
90,000 ? 30, 800 = 59,200
sooooo 59,200 should be my offer?
11,840 20% down, I will finance the balance
1000 closing costs
1500 tax, insurance, utilities for 6 months
12,000 rehab
26,340 total cash needed to do this
Please help!??.am I missing anything? Am I doing anything wrong here?
Thank you,
Jim, Omaha
Whew… - Posted by Stew(NE)
Posted by Stew(NE) on March 11, 2003 at 15:31:37:
I’m no Guru, but I thought your numbers look good for out here in the Midwest. I am glad Ron answered favorably. Joe knows his stuff, but Ron is more familiar with the Midwest markets and the 4 to 5% appreciation rates.
Re: What am I leaving out? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on March 11, 2003 at 13:33:13:
Jim–(NE)--------------
So far you are doing fine. Now, if you need to buy for $59K, you need offer less than that to give the sellers satifaction in getting you higher. So, you offer about 5-10% less than that.
But. You should find out what they owe on their loan. Few people can sell for less than the loan amount. Unless you get into a short-sale situation. Which is not very likely here.
Good InvestingRon Starr***
Everything! - Posted by JoeKaiser
Posted by JoeKaiser on March 11, 2003 at 10:25:51:
Jim,
Real estate is an art, not a science. As much as we’d like to be able to pencil in profits using figures like you provide, it just doesn’t work this way.
Real estate is all about the people, not the numbers. Sure, numbers matter, but it’s the people who make things happen.
Your offer should be the least amount the seller will take, if (and only if) that’s a number that makes sense to you. Now, it’s up to you to figure out how to get to the sellers bottom line, and I can assure you it will not be by simply making them an offer through an agent.
Also, you’re missing an important dynamic here. It makes no sense investing $30k, plus a whole bunch of time and energy, to “possibly” make $10k. That’s a formula for disaster.
You need to think in terms of 10x. Invest a dollar, make ten. Invest a grand, make 10k, etc. I see people who think buying a $275k home in hopes they can squeeze out a $10k profit somewhere down the road is a good deal. Insanity.
I’ll invest $5k to make $50k all day long. Even better, I’d prefer the $5k to be $500 and be somewhere in the 100x range, but that doesn’t happen often, obviously.
Think 10x, buy at rock bottom with other people’s dough, and at least you’re in the ball game.
Joe
Re: Whew… - Posted by JoeKaiser
Posted by JoeKaiser on March 11, 2003 at 21:07:27:
I am in the midwest as we speak, investing. The rules still apply.
Forget numbers, focus on sellers who must sell and sell now. Who are sick and tired of their property. Who will say “yes” to the first person who sticks an offer under their nose.
You will look silly offering $60k for a property where the sellers will take half of that.
Don’t think it happens? Think again.
Just last week an agent buddy of mine turned me on to a 5 unit listed at $95k. They’d accepted an earlier offer of $78k that didn’t work out. What’s it actually worth? Who cares?!?!
I negotiated a contingent contract to $48k, and when we finally signed off, we signed off at $35k.
You will not find a formula that tells you to offer $35k on a property listed at $95k, no matter how many courses you buy.
Negotiation skills are key. Do you want to spend $20k and a couple months to make $10k, or do you want to make $30k with the stroke of your pen?
The pen is mightier than the hammer. If you must choose your weapon . . . choose carefully.
Joe
Re: Whew… - Posted by Jorge
Posted by Jorge on March 12, 2003 at 23:39:35:
Joe,
I am curious. Can you tell us all what the circumstances of this deal was? What was it that you said that would make someone sell a property for 35k from 95k? And how it is that you had a contract for 48k and went down to 35k?
Right now I am looking at some rehab homes and have made some crazy email offers and most did not respond and the 2 that did said no and knocked off 3k the selling price. So I was going to have my contractor friend tell me how much he would charge ME (his friend) and then add some more to that price and start the negotiating process.
So some tips from you would be greatly appreciated.
Thanks,
Jorge
I missed my opportunity… - Posted by Stew(NE)
Posted by Stew(NE) on March 12, 2003 at 09:08:00:
That property that you are going to get for 35K, Is it in Nebraska? If so, how about a little flip to me.