Found a foreclosure in Harris county Texas that I want to flip. Here is what I have done:
Inspected the property, and neighborhood and looks like a seller if I buy the property “right”
Ithas some foundation work that needs to be done and have an setimate
I have a hard dollar esitmate on the rehab, plus a retired contractor to check the bids. THE HOUSE HAS EXTENSIVE INTERIOR DAMAGE.
Meeting with realtor tomorrow to possible sign the contract
We have the comps
QUESTIONS: ???
When buying a foreclosure I know I am buying “as is”. Is there anything I should put the in contract other than getting it financed?
The house is listed at $ 66,500. My rehab cost will be $15-17K. I havn’tgot the hard money cost just yet and was wondering if you guys had a ballpark working estimate.
I have a number in my head that I want to offer for this repo, but was wondering what you guys’gals would think a good starting number would be.
It’s a single family/3-2/1100 SF/built in '71/will fix up nicely.
I know that I have ot provided all the info you need, but I want to do this first flipper house without too many noobibe mistakes.
pOOOOO that’s different if you get it at 37k then it’s a great deal cause your after market value will cover the cost of expenses…i didn’t have that info before.
I checked over all of your math and it looks like a good deal, but it all depends on whether the bank will dump it for $37,000. That’s a big what if. My gut feeling is that they won’t. Just ask them how long it’s been on the market. If they’re desperate to sell, they might accept a low ball offer. If they’re not motivated, they’ll probably laugh at you and make a counter offer. Either way, you need to run the numbers so that you know what your maximum bid is (your limit) so that a profit margin still exists.
For a quick sale, I would count on getting 80K for the property. Then working backward, 75% of 80k = 60k and then subtract fix up costs leaves you at 43k. That would be my max on the deal. Start with a low ball offer and work up. You won’t get the deal any lower than your offer, but you can always increase your offer if they say no to the firstone. Remember that 25% (20k) has to cover all of your holding costs as well as selling costs. If you have not calculated all of the costs correctly, you may end up with less than you had expected. Just because you have found a house that you like and the bank wants to sell, don’t let the bank stick you with an overpriced lemon. Remember that you are the one taking the risks. You need to be paid for it.
Ok here is how my numbers would look on the same deal…
ARV $85,000
Repairs $16,000
Closing costs (5%) $4,250
Mortgage, taxes and insurance payments @ 6% (~$400x3) $1,200
If you sell using an RE agent (6% of ARV) $5,100
Total expenses FSBO = $21,450
Total expenses Realtor = $26,550
Total debt = $61,450 - $66,550
Profit after sale in 3 months:
FSBO = $23,550
Realtor = $18,450
either way a good deal for a newbie. NOW! :-[
Will the bank take 40k prolly not. If the listing has been out you and every other investor has thrown the same 40k number at it cuz everyone aims for the $20k profit number. I am comfortable with a $10k profit on my first deal after consider all the things I consider up above. Some banks won’t even counter offer they will just reject it and ask you to submit another offer all over again. DOH!
I tried a lil speel with the listing agent of one of these REOs… well I was thinking of putting in an offer of 49K… she says well that would be a lil higher… a LITTLE. So we tlak some more then I say SO you say if I put in an offer for 47K that will be a lil higher? She studders and says well 49K would be a lil higher. Now ya know where everyone else was at when they got rejected. 8)
The problem with “being ok” with a $10,000 profit on your first deal is that you probably won’t get $10,000 if you calculate it tightly. Even if you have a good estimate of the work to be done, there are always things that come up that were not in the original estimate. Also, if the property does not sell quickly, you are going to have holding expenses nibbling at your profit. It does not take long for a profit to become a loss. With this being a first deal, it can be a killer.
Understood. Usually I will look at comps and since here in dallas it is a buyer’s market most houses are at 3-4 mos. days on market (DOM). So typically I set one more month over that for holding time.
As for repair estimates I throw a pretty big number at a house knowing that it will be much lower to do actual repairs. This last house I figured $15,000 and when I let a friend of mine that does house renovations look at it he said his guys could do it in 3 weeks for $7,000. He said he could go lower if I did all the demo which I planned on doing regardless. I have more time than money when it comes to evenings and weekends.
I also figure in 5% of ARV for closing costs on both ends. Sometimes, depending on the ARV I have to adjust that a bit.
All of that I shoot for $10k by realtor and $15k FSBO, but because I am always looking at worse case scenario I keep the realtor profit number so incase I don’t get a quick FSBO sale.
I also think I can lower my costs on realtor commission from 6% to 3% if I oay for one of those MLS listing services. That would save me another $3,000 on a $100k property.
