I got a deal lined up. its a house in not so good of shape in a not so good area. quick background. Lady owned the house, died, left it to the family. 4 years later now has 7,000 in back taxes. house ARV 56k. How do I do this wholesale deal with 7k in back taxes, and approx 8k in repair to be rent ready?
Need help, ASAP, Time sensitive, as the city will take the house due to taxes Dec 2nd.
If I were you, I would wholesale it just as I would any other property. Make sure your buyer is a true cash buyer who can settle quickly, and make sure your title company can act quickly to get a quick close. When your seller and buyer go to settlement, the title company will payoff the back-taxes from the seller’s proceeds and record the new deed before releasing what’s left over to the seller.
If ARV is $56k, then take 70% ARV (or in this case 65% since the neighborhood is iffy). So that’s $36.4k. Now, minus $8k for repairs (which seems kinda low for repairs, $8k is basically paint and carpet in a small house, have you had a contractor confirm this repair estimate?), and minus $7k for the taxes. That gives you $21.4k. This is the Maximum Allowable Offer or MAO. Now back out your fee. Example if you want to make a $10k fee, you need to get the house under contract for $11.4k or less.