How to tell if it's a "no deal?"

Bird Dogs, Wholesaling
1

We have a lead on our first deal. I have a good feeling this is a bad deal, but I’m just not sure. The house is about 45 minutes out of our target radius, for starters. Second, the guy only wants to get 8k for the whole thing. So we had a friend check it out and shot a video for us: http://www.youtube.com/watch?v=RUMiRn3yTXA

We’re pretty confident we are looking at serious foundational issues to start with, and cosmetics are in the tank. The other houses on the street don’t appear to be in the best conditions either. I’m not sure i can attract a buyer in the $15 - 25k range to make it worth it. Is there any hope in making a deal?

We have an appointment to meet the seller and see the house tomorrow afternoon. Please help!

2

Hi,

If FMV / ARV in this area are only $20k to $25k this is an extremely bad deal!

If you buy for $8k your closing cost’s buyers side are probable $400 to $600 dollars, then add property insurance another $350 for half a year!

Then to re-sell for $25k your looking at $750 to $1000 dollars for sellers side cost’s.

So it takes $2k just to buy and resell, I think the crack it shows on your video is caused by settling, however just the exterior to paint, seal, do masonry grouting, repair rain gutter, etc. will cost you $5k to $7.5k then the interior probable needs $20k or more worth of work depending on condition of electrical, plumbing and mechanical.

You would probable be in this over $40k without blinking an eye, if FMV is $25k your in a loser before you get going!

                       GR
3

I agree with Gold River, there is not enough equity to make the risk worth it.

4

Gold River, why should he have to pay closing costs? That’s the buyer’s responsibility.

Here is what I’d do. If you think it’s possible you can make a few grand on it, tell the seller you won’t be buying it, due to the state it’s in and the neighborhood. But, you may be able to find him a buyer. Then, talk him down as low as you can, and contract using a flex option contract. The flex is non-binding, so you won’t be tying up the property when you’re not confident you can flip it. And, if the seller finds another buyer in the meantime, he can cancel it and sell.

If it’s a shady neighborhood, you want to calculate the rental numbers so you can present those as selling points. You can say, “It’s ugly! But we’re talking 20% annual ROI!!!” Something like that. Someone may bite on a high ROI fixer-upper for less than $10k. You never know…