My first property I looked at 40-50 homes to find to find the right deal for me. Of the 40-50 houses only 5 or so were worth making a offer. I want to do a good job as a investor. I have over 25 years experience as a builder/remodeler/GC. Most of the investor deals where as follows. The ARV was value was overstated.The repair value was understated.( note:I like it when investors show a detail of the repair values versus a lump sum.)
Putting together a investment package.
Best places/most trusted place for comps??
show detailed estimate of repairs.??
show financial requirements??
pictures
whats missing??
Is there a sample investment brochure or format that is investor friendly (like to share??). Easy to put together and answers the basic questions??
Hi,
I have a professional background in construction having started out over 31 years ago and have been an engineering and building contractor, the difference between us being I bought my first investment property the same year I got out of high school, so we have a little in common.
I do not look at any properties at all until I run the numbers and look at asking price against FMV! I know my cost to buy a property is roughly 2% of purchase price for escrow, and whether I pay lender points or what my hard money lenders need up front!
Then I know what it cost’s to sell the property which is roughly 7.5% (5% to a listing and 2.5% to closing), so with that said I have to buy for at least a 10% discount (spread) between purchase and sale, if I made a contract on a pristine property and had buyer for back to back closing I would break even.
So I want to make at least 15% for pure profit minimum in my deals, with that said I have to buy a $100k FMV property for a minimum of $75k.
But I would have some additional cost’s appraisal, home inspection, termite inspection, transitional funding cost’s, etc. So even if I found a pristine property for $100k FMV I would have to pay $70k roughly to buy it, now this is strictly an example as different methods have different levels of income depending on returns, but this is the theory.
Now, if I am going to do some type of rehab whether lip stick and rough (paint & carpet) or a full on gut (permitted) remodel with updating of everything I then have to calculate and consider construction cost and overhead. I generally supply a range estimate for a rehab for a buyer based on whether buyer will use it for a rental or whether buyer intends to fix and flip. (The way property is finished is extremely different to rent vs to sell to end user buyers)
Now if I was wholesaling this example I might look to make $3k to $5K to move it in a few days or a week.
This basic theory can be increase or decreased accordingly but it’s fairly reasonable!
Do all your basic work at your desk, then look at only the properties with a large enough spread for what you intend to do, this way you can avoid wasting time looking at everything that comes along.
- Best Comp’s from a realtor based on actual sales within a quarter mile, half mile and mile of your subject property and less than 3 months old.
- You need to make your own estimate of repairs as complete or incomplete as you desire.
- I am not sure what strategy you intend to use but with your construction background fix & flip is right up your alley, but all you supply as financials with your purchase is a loan approval letter from your mortgage lender or hard money lender or a bank letter of credit for a cash purchase.
- If you want pictures, take pictures! If your intending to directly re-sell with transitional funding, take pictures! You can do everything reasonable and ethical in real estate as long as it’s in good taste!
- What’s Missing? What do you intend to do? What method of investment do you intend to use? (Fix & flip, short sales, wholesaling, lease / options, bird dogging, subject 2, wraps, owner finance?)
There are a lot of methods and types of real estate, figure out what you would like to do and get all the education you can while you work on the first deal.
And from your other post I probable have a few forms and things I could send, send me a PM with your e-mail address?
Good luck,
GR
Gold River, you took the words right out of my mouth.
Go and ask a Realtor to run some comps for you on the home. It saves you so much time, and stress. Plenty of Realtors will do this for you. After you have these numbers, you can pretty much take over from there.