Possible first deal. Help Please

Bird Dogs, Wholesaling
1

Hey hows everyone doing?

Found a woman looking to sell her house on craigslist today.

Shes got a 4 bedroom 1 bath fixer upper. ARV is 140-150. Needs 10-20k in work ( havent seen the inside yet)… . She’s looking for 90k right now but is accepting best offers. ( i belive i can get her down)

At 140 ARV and 20k work and 5-10k profit my MAO would be 68k-72k. Am i on the right track?

Now the woman who owns the house is an out of state owner and lives 1500 miles away. The house is now sitting vacant. She has family who lives close by and is showing the property. First question, can i get a contract on the house without the owner being there? Is there like a power of attorney or anything that can be granted to family? Any insight?

Also I have never filled out a purchase contract? I mean ive seen it done a few times but never done it my self? Anything I should know. I am planning on putting a subject to approval and subject to inspection.

Any help please!

Thanks,

Steve

2

I’ll be the first to admit that I am NOT one of the super uber experts, but since this message has gone “unreplied” for several days I thought I’d offer some advice.

You may be able to get the contract signed via fax or other methods. I know some people flip houses from other states, without ever leaving their home. I don’t know if you have to have a title company, lawyer or notary involved at all, but I would suspect you might.

As for the purchase. You probably have seen the cookie cutter recipie for purchases before

Offer Price = 60% of ARV - Estimate of repairs (and sometimes + your fee if you wanna build in extra profit for yourself.)

I’d recommend taking the lower figure of the ARV $140,000 and start with 60% of that, which is $84,000. Then subtract possible price of repairs. Lets say approximately $15,000, splitting the difference between your $10k and $20k. That gives you a starting point of $69,000.

Not having seen this property though, how are you coming up with that estimate for repairs? If they gave you a quote that they say they got from a contractor, you could be setting yourself up for failure. I recommend getting your own bids. As for that, I also recommend getting your own appraisal, or find someone who can do an “Opinion of Value.” If you have any realtor friends they would be a great person to ask a favor of on this matter.

You should also be prepared for the idea that the property may be hard to move. 4 bed 1 bath is a very odd combo. Of course if you’re assigning it, it would really be up to the cash buyer to make that call. I’d guess they may add a bathroom, but maybe not. I think I would if it were me.

Before I did anything I would look at the property, and have someone knowledgeable estimate the ARV and the repair cost. Or if you’re really itchy, sign up the contract, with a clause letting you out of the deal if the appraisal is surprisingly low, and/or the ARV turns out to be lower than expected.

BTW: the fact that she’s out of state will work to your advantage. I’d certainly push the family (who may be getting tired of showing the house) to advise her that your deal is best for everyone.

I hope I offered some information you haven’t thought of yet.
Best of luck,
Mike

3

Your buyer will want to convert one of those beds into a bath. Did you factor that into the repairs?

Is it a rental opportunity or a rehab? This plays a huge role in how you price it. If it’s a rehab, here is your offer:

ARV $140,000
Max % of ARV 60%

Repairs $20,000
Closing Costs (%) 3%
Holding Costs $621
Wholesale Profit $10,000
Max Offer $52,080

Rental Rate of Return:
End-Buyer Cost Basis $84,000
Max Rent $1,200
Projected Monthly Expenses $192
Cap Rate (Rate of Return) 14.40%

If it’s a rental, you may be able to increase the price a bit. I wouldn’t go higher than this, though:

ARV $140,000
Max % of ARV 75%

Repairs $20,000
Closing Costs (%) 3%
Holding Costs $825
Wholesale Profit $10,000
Max Offer $72,450

Rental Rate of Return:
End-Buyer Cost Basis $105,000
Max Rent $1,200
Projected Monthly Expenses $192
Cap Rate (Rate of Return) 11.52%

4

why 60% of ARV?

5

In this situation, I can agree to what mmixon said. On your question about how to get the owner to sign the contract. You can fax it to her or email and she can sign it electronically.

6

property has probably been vacant for many years and most likely will take more than 10k for repairs. for a flip it will probably need a full rehab and that is sure to cost more than $20k… First go see the house and assess the condition of it so you can put real numbers together.