Should This be the First?

It seems I may have found a property through my business. A man called up for an estimate to paint the interior of a house. It turns out his mother passed and he will be doing some very minor improvements before he sells it. He lives out of state and will be listing the house Aug. 1st I figured this might be a great opportunity to get into the game…

I checked the place out ( exterior today, interior tomorrow) and it looks like it will need a basic rehab and not much more. I could see a exterior paint job , minor landscaping a few shutters et al. On the inside ( haven’t seen anything but the 70’s looking shades) I’d expect carpet, kitchen, and paint.

I did a little research on the area and found that the same model Cape Cod was sold down the street for 329K. I’ve seen pictures of that house and while it has a finished basement and other amenities I don’t see how the house I’m prospecting could go for any less than 310K after 15k in rehab.

I’ve contacted mortgage lenders but their options don’t seem palatable.

I know a commercial investor who is willing to offer 200,000 and a 30 day closing but I think the offer is too low and may end all discussions or possible negotiations. The owner claimed that an agent would list his house at 289K but I don’t think it could sell any more than 260K, with an agent.

That being said, I was thinking of making an offer of 245K and going through a hard money lender. The problem is I can’t find one in New Jersey. Does this sound like a decent proposal? And where can I find an investor. The commercial broker I know seems to want a huge profit, and isn’t too interested in small gains.

There are also some great lenders that do short term mortgage’s just for fix and flip reasons of course the rates are higher then normal lenders on the other hand they are lower then hard money rates!

As far as your asking price that sounds more then fair! Make sure you do not leave $$ on the table!

Thanks for the input…

I’ll elaborate on the situation. I’m a self-employed painting contractor with no savings. :cry: My credit hovers in the 580 range from some bad debt situations arising from my first business venture, University Painters. I was a franchisee and took my licks.
Basically I have nothing but a car.

The property I’m looking at will be listed next week, so for some reason I feel this needs to get done before that time to save on realty fees.

I’ve inquired about loans, but it seems that the cost would be in the range of 2600 on a 270k mortgage. That’s too steep. Holding costs could become exorbitant. The biggest problem is that I wouldn’t be able to get the small amount of rehab $ necessary 15-20K.

That’s why I was considering HML.

You really think it’s wise to bid 200K when the house could possible go for 275K. Why wouldn’t the seller just try his luck by listing? I know it’s best to ask lower than what you’d expect but outside of this one investor who says 200K and no more, I don’t think I can get this deal done without risking my butt. :slight_smile:

Do you have any friends or family with good credit that might let you use there credit for say an extra 5k in there pocket?

You had to ask…

If I knew where to get money, I would have been in the game several years ago. At the least, this potential prop has gotten the ball rolling. Money is an issue.

I guess it is possible that the commercial broker/investor can lend me a personal loan with interest, it just hasn’t progressed that far. He is telling me to offer 200K for the prop and I think that’s his only offer. I’ll have to find out. Besides, wouldn’t the holding cost’s of the mtg. decimate the profits if I were to get the 5k ? Conservatively the profit is 30K, ideally its 50+, depending on the market and obviously the negotiated purchase price.

I’d love to get in that house, do some basic rehab and flip. Without the seller having to pay a realtor, he can essentially shave off 5% his initial asking price of 289K, which is ridiculous to begin with considering he just wants to paint the place and sell it. I feel it needs 15k to bring it within the 300-315K range. IDK. I’m just a newbie.

I saw the inside today. On the second floor of the Cape Cod there is one room that is finished and another that is lacking flooring, drywall and whatever else should be there.
1st floor needs the bathroom and kitchen gutted. Appliances look OK. Other than that house needs nails pops fixed and a decent amount of spackle. New carpets throughout, and a paint job.

Exterior needs new roof, minor landscaping, and a paint job or reside. I personally think the right paint job and some shutters would work just fine.

I spoke with the owner today and offered 200K. He needs to consult with his brother and with Real Estate agents on Thursday. The first agent told him he could get 289K, IMPOSSIBLE.

I asked what type of work he wanted done. He said just paint. Dont fix the second room of the upstairs. I explained that he might be better off just selling as is, because he is basically marketing a fixer-upper.

I guess that the other REA’s will send their investors to size up the property. At this point only a neighbor, who bid 150K and myself , 200K , have given offers. I haven’t put on a hard sell because he hasn’t explored all of his options and he needs a chance to. He wants to be informed but I’m not sure what the REA’s will say. I’m going to call him Thursday night/ Friday.

Any suggestions?

(Just one mans perspective)

At this time in my life, I look for easier money.

I have said in past postings, that one of the best turning points
in my quest to make money, was when I stopped rehabbing.

That removed a lot of distraction and I could focus more on making
offers to distressed sellers and less time repairing distressed houses.

Let, em tear them all down. You CAN find nice homes that you can buy for
more than 30% off of true value including repair cost.

There are distressed sellers in every neighborhood.
Around million dollar homes? Oh, yea!

This guy is trying to get out from under an even bigger monthly payment.

Set a side the fact that I gave all my tools away, so that I could not be tempted to do any repairs.

Let’s discuss offers.

I of course will have to use the numbers that you have given.

$329,000 Finished value. ( How sure are you? )

  • 98,700 30% of value
    $230,300
  • 15,000 Rehab cost
    $215,300
  • 10,000 Your rehab management fee. (If you work for free, give me a call)
    $215,300
    5,000 HML / family fee?
    $210,300 This is close to where you want to be. Now, try to make it better.
    Remember that you make your money when you buy.

I would have started about where the neighbor did, $150,000 -$170,000.

I am not expecting to get it for this, but I have been surprised many of times.

If he countered at $275,000, I’ll go up $3 - 6,000 the first time and slowly there after.

If you have found the right seller, his anxiety level will be high and his need will be desperate.

I’m looking for the guy that can not say no, at most any price.

Or the price that I can not say no to.

With practice you will be able to review many properties and make enough offers
to find the right seller in less time than you can rehab that house.

I would rather paid $25,000 – $30,000 more for a nicer home, easier and faster to finance, rent or sell.

Operating with property that are twice this value, you can use a smaller % spread and do very well.

15% of $700,000 is a $105,000 gain.

Using your fiqures of $30 - $50,000 gain, you will have to do 2 to 3 rehabs to compare.

I do not what to discourage you, but instead open yours eyes to easier possibilities.

I have bought many, almost finished foreclosures.

These people tried to make the houses to nice for the type of rentals that they were and ran out of money before they could get that first tenant moved in and paying.

(Just one mans perspective)