new investor with a wholesale deal. I think????

Bird Dogs, Wholesaling
1

I have my first deal under contract and would like some feedback as to what some seasoned investors think of it. I have a contingency in the contract stating “This contract is contingent upon securing financing.” in case I need to get out of this deal.

Here are the numbers

purchase price 40K trying to wholesale it 45K

ARV 135K determined by COMPS and I think that playing it safe. None of the comps had a 1/2 acre lot attached to it with a 40ft working shed.

Repairs:
25-30K foundation repairs this is the most expensive bid(cheapest was 21K)
9K to reroof
4K to remodel both baths
3K to remodel kitchen
6K for new garage and driveway
4K new paint inside and out
3K new appliances
I think these numbers are all playing it safe

I know the rule of AFV * 70% - repairs-assignment fee= most would offer
45k(end buyer purchase price)+54K(repairs)=99K(total cost)/135K(ARV)=73% of (ARV)
I know investors look for 70% of ARV with repairs but I was thinking if someone might not care for the 3%. Is this right for me to think an investor would still be interested in purchasing this house? Would any of you seasoned investors even bother with this house? I was also thinking an investor might be able to do these repairs cheaper.

As this being my first house under contract I’m just a little nervous about finding a buyer. I have a buyers list but since I cannot obtain a key to the property until 2 weeks due to seller needing to clean out the house I don’t want to contact my buyers since I cannot take them inside the house and thus losing their interest in the house.

If any seasoned investors have any comments or advice I would greatly appreciate it. Thanks in advance for your time.

2

Salazarproperties,

I don’t see this as a deal, as the 73% you are accounting for does not include closing costs, financing charges, insurance, landscaping, realtor fees, lawyer fees, contingencies for overages (minimum of 10%), etc. Especially considering there is foundation work, which can be a Pandora’s box.

Despite that, in this market I know personally I am not looking at anything more than 55% ARV.

There also has to be an allowance for a 7%-15% swing to the negative on the ARV as this is a buyers market and noone is going to pay asking price, unless it is marketed to someone with troubled credit as a lease-option, as they are more focused on a way to get into a house, than the actual number.

Taking into account the above, your actual numbers are more like 85+% ARV, depending on where it’s located, which can affect this number.

Now, if you could get this same property for around $25K, plus your $5K fee, it will bring you to around 70+% ARV, assuming a 100% purchase price of $135K, still not making it very attractive.

closing costs - $1K
financing charges - $2K
insurance - $400
landscaping - $500
realtor fees (assuming 4.5% of selling price of $135K) - $6,075
contingencies for overages (minimum of 10%) - $5500

Above Total - $15,475 PLUS your original repair estimate of $54K,
= $70K in repairs/costs

PLUS your fee of $5+$40K purchase price puts the total amount at $115K (or 85+% ARV, assuming 100% purchase price of $135K).

Long story short, there are much better deals out there, unless you can get this one for around $10-$15K, plus your fee.

Good luck on the next one…

3

I just had some new numbers come in.
The foundation repairs is 25K
completely remodeling the house with appliances and carpet is under 25K
total repairs including landscaping 50K

There was a house that sold for 140K just yesterday at the end of the street and it was only a 3 bdrm 1.5 bath 1080 sqft and with half the lot size of mine.

45k(end buyer purchase price)+50K(repairs)=90K(total cost)/140K(ARV)=64% of (ARV)

Would this now make the property more interesting?

4

Do your new revised numbers include the following?..

closing costs - $1K
financing charges - $2K
insurance - $400
realtor fees (assuming 4.5% of selling price of $135K) - $6,075
contingencies for overages (minimum of 10%) - $5500

5

The other problem I see is I’m going to have 50-60 grand tied up in a 135K property. Way better deals simply based on time. The bottom line is that most of us would pass this deal up.

If I’m going to be sticking that kinda money in something I better have a hefty payday on the back end. For 50-60 grand I could rehab 3 properties with the deals we have been getting lately.

Nate-WI

6

I agree with the other posters most investors can find houses at 30-50% with no repairs needed. And depending on your market a 45k house can be a duplex. Try to find better deals in this market that would be considered a complete junker. 50k in rehab can buy you 2 25k houses that only need 5k tops in work. Be proactive.

7

30-50% below market value without repairs??? How do you find deals like this? I’m located in Hollywood, CA and we’re saturated up the ga-zoo with people in Real Estate. Is it still possible in these areas?