So, I’m new to REO’s. Actually this would be my first deal. There is an open house this weekend and the lender is accepting offers starting at 82k on a property I’m interested in. ARV should be around 160-170k but in today’s market I would try to resale at 130-140k (at this price, would be a quick sale I believe). I haven’t seen the inside yet so not sure about repairs. For now lets assume it needs no more than 5k in repairs.
What should I expect to pay to close if I get the property for about 85k and would it be a good deal? I was thinking about conventional financing (have 30days to close). What should I look for in an REO and is there anything I should be aware of?
So if I get the property for 85k + 5k repairs + 5k closing + 3k holding costs? What else am I missing? Does this sound like a good REO if ARV is around 130-140k and I get it for 85k?
What is the highest bid you guys would submit on this house? I wouldn’t mind renting this out OR selling it. Rents in the area go for 1300-1600
For now lets assume it needs no more than 5k in repairs.
VERY VERY UNLIKELY for an REO. REO prices come from a BPO (Broker's Price Opinion) which is usually based on market comps minus fixup. If they're listing it at 85k and ARV is 160k, there is much more than $5k in fixup. There's probably $20k in fixup. (still not a bad deal if you can sell it quickly at $140k... not a "great" one, either.)
What should I expect to pay to close if I get the property for about 85k
I believe 5% is the max closing cost you can pay on a conventional loan (so in this case, $4,250). I'd figure about $3k.
I’d make the following assumptions:
85k + 20k repairs + 3k closing + 3k holding = 111k in.
Rents for 1300. Not a “good” rental, but not a bad overall investment. If you can get $1500, that’s makes it much better, but the high end of a range is usually not the number.
If you are sure you can can sell it for $148k+, and rent it for $1400 it’s a decent “slow flip” deal by my calculation.
I guess it’s even a decent flip without renting it at all if you can sell it for $148k.
by “slow flip” I mean buy, fixup, rent for a couple of years, sell at today’s market price. I don’t think there’s a handy equation for the “slow flip” just yet… in my mind, i tend to use:
acquisition + fixup < 75% ARV AND
meets the “30% rule” (same as the oft mentioned 50% rule, but at 30%)
but i’m just another beginner with a plan (that others say has worked for them.)
the highest i’d offer will depend on how much fixup there really is and what the ARV really is. if it’s really only 5k to fix to get to a true $160k ARV, the real question is how much/little profit you require.