$800K SFR selling for $650K? help...

hi everyone. new to RE investing, new to the forum and this is my first post! is this something an experienced investor would be interested in? i have no idea if this worth pursuing or how to approach this if it is. i know the name of the game is buy low, sell high but… :help

SQ FT 1407
3/2
2/garage
vacant
monthly $1100
amount in arrears $2200 (<-- what does this mean?)
$200K balance
market value according to Zillow and RE/yahoo is $800K
Sunnyvale, CA - Bay Area

not listed yet, asking $650K. i have not contacted the owner but they are moving and want to sell.

Budd

Hi Budd,

        First as an investor I do not consider California to be stable yet in reguards to the housing market and depreciating home prices, although like Arizona and Nevada the market loss has been slowing down and shows some signs of impending change.

The bigger the price tag the more absolutely certain you have to be of the market value and ability to sell.

I reccomend you try to sell for 5% or so below fair market adding value and undercutting the market for a potential quicker than market sale, with that said and assuming your $800k price is correct I would market it for $760k.

Your realty fees to re-sell this will run $45,600 and your closing cost’s will run somewhere around $11,400 to $15,200 in worst case you will now net $699,200 as worst case assuming a full price offer.

Now how much risk and reward would be reasonable for a $760k home, if I were doing it I would probable look to make 10 to 15% clear provided the home is clean and pristine and will sell exactly as it is.

If I have to go in and rehab I probable want 15 to 20% clear profit.

So I am probable looking to make $76k to $114k on the deal, let’s say an average of $95k on this clean pristine house, so $699,200 minus (-) $95k leaves $604k and then I would have to calculate my overhead and closing cost’s this is probable some $7k per month and I would think average day’s on market are around 150 days so you probable need to figure 7 months of closing cost’s or about $49k dollars.

So we are now down to $555k without your purchase closing cost’s which probable run you almost $18k including appraisal, inspections and personal expense’s so about $537k is the magic number provided the house is clean and pristine and will sell exactly as is.

Now this is the delima, if the property is truly worth $800k right now, why would the current owners sell to us for $537k when they can probable discount it and sell it to an end user for $650k.

You see there $650k asking price is meant for an end user, not an investor.

And if the place needs a little work, an end user buyer will do it as part of home ownership and general repairs where we as investors have to put the cash up and finish everything in 4 to 6 weeks, and of course if rehab is required you have to deduct these hard cost’s and overhead and profit from your purchase price.

THK YOU for the detailed response GR! would you attempt a flip (double-close) with this deal? i think Zillow.com and RE/yahoo are pretty close with their assessment of the market value- they both say $800K for this property. thanx again GR

Budd

The very last thing in this world I would do is buy an expensive property based on a value I got from internet web sites like Zillow! You’ve got to do better than that!!!

Mike

Ok well that’s why Im here, to learn from those who know. im not in the Know! lol

Budd, tell us what your purpose in investing is going to be. This will help us tell you how to value it. Are you bird dogging, wholesaling, flipping, buying and landlording, etc.

hey Hooch, i’d have to say my goal right now is wholesaling. a flip seems like it’s almost the same thing as wholesaling? was looking at coastal-funding.com, im not really clear on what they do- where my profit and they’re fee comes from.

thanx gang- Budd

Budd,

I answered your question for you over here:

http://www.reiclub.com/forums/index.php/topic,43281.0.html

very informative

THX Hooch!