My offer has been accepted and I am going to be getting it under contract. Now I am still wondering if this is a good deal or not. The numbers seemed to work. Person selling just wanted to get rid of it. I also wanted to know if there is still closing cost if it is a FSBO? I am looking to wholesale it, or possibly owner finance and l/o the property. any advice is appreciated, thank you.
I would say that, if your numbers are correct, you’ll have room in the property to wholesale it out or to fix it and flip it for a decent profit. If it only needs $2K in repairs, you should be able to knock those out quickly and flip it in a month or so for an easy $15K+. It also has “buy and hold” potential…if you’re into that sort of thing.
Yes, I agree with the whole fixing and flipping. I am having a problem with financing though. I do not have money and I’m 19 and am not sure if the bank would give me a loan for such a project, due to the fact i’m young and do not have a stable job due to me being college. I am just wondering if there are other ways of financing? I would really like to do the fix and flip. Is there some kind of deal i can make with the seller to still make that sort of profit? Thank you again
Hey Lando, I am also 19. You have learned the first thing about investing which is to use OPM (Other People’s Money). Now you must learn that you NEVER and I mean EVER put your credit under scrutiny and at risk if you don’t have to. You need to find an angel investor or google hard money loans to find a lender. They rarely check credit and if they do it doesn’t really matter. They base their investment on the property. But you also have to think this through. You have never completed any type of deal before, and you have to understand, that a fix and flip is not as simple as it seems. You get in their with your contractors stay on them and make sure they do there job QUICKLY. Then you have to sell, or rent out, or do a lease with an option or something. But the question that no one could possibly have the answer to is how long it will remain unsold, or unrented. And you have do decide if you want a lump sum or cash flow. Anyway, back to your last question, basically if you can make the deal you can get the money. But you have to stop thinking with a proud potential homeowners mind, and start thinking with an investors mind.
yes there would be closing costs involved in this transaction. If your looking at conventional financing, I usually estimate the closing cost at between 3-5% of purchase amount.
Now I have made the decision to fix and flip the house. All I need is financing. Now if I use a HML, and me being a new investor, my age, and job promiscuity due to me being in college, what worries should I have about going to an HML, or what should I expect with this deal?
The whole purpose of dealing with an HML is to NOT have to worry about these things. If you find a so called HML that asks for these thinsg skip along to another. A HML should only want your basic info, and the property info. They shouldn’t ask about employment, and shouldn’t care about your age as long as you are legal.
Thank you, It feels like i have been beating my brains against a brick while trying to figure out why these HML people i continue to call are asking such questions. I knew such questions should not matter if it is a HML. As long as I can pay their point fee, their money back on sale, and interest if payments need to be made, then the loan should be there. If my view is wrong, then please correct me.
You are correct. Now all you have to do is decide if you can use a HML that requires a draw account, for payment after repairs, or on that will let you overborrow, and get cash at closing. The latter is haard to find when looking an trad. HML’s, angel investors (lower scale), are better for this.
I do have a cash flow, but if i did not, why woul dyou say back out?..to many doors have been opened and I think until one closes I believe I will continue to pursue the rehab. PERSISTANCE is what is needed here I think. Not saying that you are wrong in anyways, and maybe I should just give it up and wholesale it, but not yet. (NO DISRESPECT INTENDED)
None taken, I’m in a similar position, but I’m scared stiff about making the interest payments for a HML. What I need to do is to get a business line of credit, I think. Even with a “no-cash” deal, there still is a cash requirement.
For those scared, of getting a HML b/c of the interest payments, I would suggest, finding a private lender and negotiating something like an overborrow, on a 3 year 11% interest no payment balloon. You could do it for a year, but the three years give you a little more freedom if you want to hold and maybe refi, and by overborrowing you get some cash out at close.
I found a property with an ARV of at least $100,000. Other properties sold in the area between 100k and 130k. Say the properties ARV=$130,000 and need about 40k of work, interior and exterior. It has potential. The seller is asking 70k, I may get him down to 67k. What should I do?
I was thinking ARV=$130,000-32,500(.25)-40,000 for repairs=57,500. Is this the figure I should be asking? Then charge the buyer $64,000. The difference would be 5% of the ARV=$130,000 which is $6500. Or just take $3,000 for myself and swing a deal with the seller for $60,500 and find a buyer for $64,000. Is all this correct, or how should I swing this? What would be the numbers?
I have looked at your numbers and here are my thoughts-
Why did you use the highest ARV value?
2. What are the monthly holding costs that your investor/buyer will pay as he rehabs the property?
3. Here is the formula I used the arrive at an MAO- maximum acceptable offer
A. ARV = $115,000 (half-way between high and low figures)
B. $25,000 (profit for your investor/buyer)
C. $10,000 (profit for you, the wholesaler)
D. $40,000 (Rehab costs)
E. $ 0 (Holding Costs for your investor/buyer)
TOTAL w/o Holding Costs= $40,000. This is only my formula and you can reduce or increase numbers at your will. I would just be a bit concerned about looking at the highest ARV as my starting point for making an offer.
4. My final question would be about how motivated the seller is and what problem does he need you to solve?
A. ARV = $115,000 (half-way between high and low figures)
B. $25,000 (profit for your investor/buyer)
C. $10,000 (profit for you, the wholesaler)
D. $40,000 (Rehab costs)
E. $ 0 (Holding Costs for your investor/buyer)
TOTAL w/o Holding Costs= $40,000 which is my offer, am I correct?
How did you get those #'s? Did you use a % or straight numbers?
And what if I wanted to keep this one myself, would I swing the same deal?
Is this fomula almost the same as yours below.
ARV$115,000-$34,500(30%)-$40,000(repairs)=$40,500(asking price)
24,500(profit for investor/buyer) $10,000(for me) $40,000(for repairs)