I learned in a real estate class that sometimes deals can be " too good to be true." The house is a 3000 sq ft house on ten acres. Owner wants to get rid of the property. He said that it needs some work done on it. Previous owner bought it updated the electrical, plumbing 2/3 of the roof, actually tried to turn the house into a double. There are 5 barns and a garage on the property. Its out in the country. The house was built in 1812. He says with estimated repairs of 50k the property could go for 240k (according to a friend who is a realtor). He just wants to get rid of the property, doesn’t have the time to put into it. He wants a 100k for the property. Good deal?
The comps of the area say that as is the house is 77-97k.
Hi Dan, I would get it under contract. As long as you have clauses in your contract that will allow you out of the deal you shouldn’t have a problem. Just make sure you get a good inspector as well as a few bids from different contractors. I would also ask your realtor friend what the average days on market in that area are. It might sell for $240,000 but how long would you have to hold it in order to get that price?
I’m no expert, but if those numbers are right you should be able to assign that baby to another investor and make a nice return very quickly.
I’ve read many times that if it’s a really good deal, you won’t have a problem finding a buyer.
Sometimes they are, but your job is to weed through them to pull out the deals. My advice is to:
- Know your numbers inside and out - get your own repair estimates. Especially watch out for shoddy work that could have to be redone. We recently had to pull a brand new roof from a house and redo it, because the prior owner didn’t follow code.
- Make sure it’s not “weird.” I mean layout, outbuildings, etc. It needs to be desirable by a large buyer pool.
- Minimize your risk. Put down $100 deposit on a purchase agreement (held in escrow by the closing agent, so you’ll likely get it back if the deal doesn’t work out). Then shop it around and see if you get any nibbles. You may want to protect your purchase agreement, so nobody tries to steal it if it is a deal.
Hope that helps!
You said the comps as-is are $77-$97 and he wants $100k? If that’s the case then it does not sound like a deal at all. You need to nail down your numbers to really know either way.
You need to estimate your own repair costs and you need to know the ARV (in your current market for this type of set-up). Doing your own due diligence is to protect you…never use someone else’s numbers.
Don’t know from your post how long he has been looking to “get rid of it”, but if it has been a while and another investor has not grabbed it, there must be a reason.
Proceed with caution.
As it turns out, the property comps at $123,000 with a potential ARV of 230k+.
His sister is a realtor is about to list the property. He never had anyone ask about the property. We are the first investors to call on the property. They are selling the property as is. The 123k is " as-is." My thought was to get the property under contract with an escape clause that allows us time to do our “due diligence.” This way if any estimates point to not being a good deal, we can back out of the deal.
when i buy property’s that are really funky are i what to tear down & build something else , i all ways ask in the purchase agreement for a 30 day vesability, that will lock the deal up & gives you time for more in dept study.
Thank you very much for all your responses to my question. This truly is a big learning experience for us. We tabled our first deal last night. We are in the process of drawing up the contract with our Lawyer right now!!! This business is really exciting, but every step we take forward, we realize how much we dont’ know!!! It makes us strive all the more to learn from those that know what they are doing!!! As Robert Kiyosaki would say, we need to increase our financial IQ.
When wholesaling, usually you sell the contract to our buyer for about 3k-10k. In a deal that is potentially large, like the one listed about in the responses, where our buyer could make a potential 60k+ profit, what should our fee be?
Not knowing what true value of property will kill you.
Find out ARV 100%.
230 000 ARV - 50 000 repairs = 170 000 as is value, even less. Maybe 150 000 value.
At 100K this is a good deal ONLY IF 230 000 is the TRUE FIXED UP VALUE.
Thanks! We did a comp check and the value right now is 123k as is. However, we want a true market comp of the area before we move an further in this deal.
We have a couple of calls into a realtors to get the comps, however, things seem to moving rather slow!!!
We used a website ABC realtors to get a comp. Is there a more reliable site? Obviously, we want to talk to a realtor.
I never pay more than 75% - 80% of the as is value. So i would offer the guy 80k maybe. Also keep in mind that a house in the country will likely sit on the market for a long time to get a buyer. As long as you can get it for a good price and can afford to sit on it for 6 months or so it sounds great. Make sure to keep the upper hand. Make sure the seller realizes he needs you more than you need him. A fast close will often encourage a seller to drop the price some as well.