Help with a deal

I live in the Northern Utah area. The market around here seems to be doing very good. I have run across a home that I am interested in and was hoping some of you could give me some ideas on how to work a deal.

The home is about 3 years old, single story w/o a basement. 1000 sq. ft., 2 bed 1 bath, 2 car garage. The owners have had it on the market for over a year now, they started out asking $130k, but they have it reduced to $115k and they told me that price is negotiable.

I think that it needs about $5000 for “curb appeal” upgrades. The owners are acting like they are pretty motivated to get it sold.

Anyone have any ideas? I have very little money I can put towards it and because of a business failure a year ago, my credit sucks and I dont think I could get a loan.

      Thanks for any ideas!!!

Howdy Ffpmed:

This deal looks a bit skinny especially with no money and no credit. Lets assume you buy it and get it fixed up and can sell it for $130K in less than six months. Lets work backwards from there to find an offer amount where you can make a profit of $10K.

$130K times 70% equals $91K less the $5K rehab equals offer of $86K

Purchase price $86K
Rehab cost 5K
Closing costs 2.5K
Hard money points 5K
Carry costs 6K
Commission 8K
Closing costs to sell 3.5K
Misc 2.5K
Total costs $118.5

At a sales price of $130K this will give you $12.5K profit which would be great except for Uncle Murphy who will take another $2.5 no matter what and will give you $10 before the other Uncle Sam.

If you can get the price that low which I have my doubts you may have a deal if you can find a hard money lender and convince them you can do the deal and they will loan you most of the money. Most HML’s want to see some of your cash in the deal and see that you can make the payments on the vacant property after the rehab.I did not include appraisals and inspection fees and some other junk fees that HML’s charge.

Ted’s advice is dead on, as usual.

Just wanted to point though, that you didn’t say what the property would actually be worth fixed up.

Just because it was put up for sale for $130K doesn’t mean that it is worth $130K.

You need to know what the property will really sale for before you can put Ted’s advice to work for you.


Boy, you guys know how to throw cold water on a guys plans! (just kidding, thanks for the reality check.)

So is 70% a good number to start with when I am looking at deals like this?

Howdy ffpmed:

If you are sure you can sell it yourself without a Realtor you may go 75%. The HML’s will only loan 70% tops and some only 65% so you will need more cash or a better deal or both. If you have all cash then you can pay more too up to 80% or if you want to buy and rehab and keep I also go 80% if it will cash flow. I do not do many deals but the ones I do make money. I am currently doing a 30,000 foot building I am getting for 5.54 per foot thats only $165K. It needs $180K rehab and will rent for $9K per month and will appraised at least at $600K if not higher. These are not once in a lifetime deals but you need to be looking and ready to move fast. I saw this on Thursday AM and had under contract Friday at noon.