Yes Im new, and yes I pretty much put every deal I come across on this forum for advice, is that wrong?
No way, I’ve gotten some great advice here.
So heres the deal with a seller that just called me:
Her and her husband both have medical problems and corresponding bills.
House is conservitively worth $340K ARV
She says needs some repairs, about $3K, I have not seen house yet but I’ll use $5K
Balance $205K
mo payment $2090
1 mo behind say $2100
wants price of $305K cash so she will have $100K to pay bills and get into another house
My idea:
offer $90K cash sub 2
$20K up front, ill find private $for this
$70K secured my note and trust deed, due when I sell in 60 to 120 days after I do the minor repairs
I could offer more upfront if she objects?
might be a $30K deal but for the taxes= $20K deal
could I 1031x on this?
Any ideas on this?
Thanks, J
Original purchase price 295k
Repairs and cure default 5k
6 months holding costs 15k (conservative)
Selling costs 25k
(340k @ 7.5%)
Total 340k
Total profit 0k
You have just broken even on the project unless you can sell it quickly and even then you can only plan on 2.5k per month. If you cannot sell it quickly, how long can you afford to have a $2500 alligator eating at your back pocket?
Here’s the problem. When sellers are calling, you need to find out what their REAL problem is (also said this in your other post, just rehashing for others). In this case, you said the sellers WANT $100K. What you need to find out is what they really NEED. There may be other ways to fix their problem besides giving them money. Especially money that you shouldn’t be giving them.
As far as the offer goes, the MAX I would give would be about $270K, and I’d much prefer to stay closer to the $250K mark. Using a rehabber’s benchmark of 70% ARV, your offer would be only $238K, and that’s minus repair and holding costs, so you’ll probably looking at closer to $220 or so.
I can’t really tell you what my offer(s) would be because I don’t know your market and most importantly, I don’t know the finer details of the transaction. I don’t know WHY the sellers need to sell.
Now, if you’re planning on making a straight take it or leave it cash offer, why the owners are selling is not that important. With that type of offer, you just make it and go on. If they accept it, you sign and close. If they don’t, you don’t. Simple. Using your figures, my straight cash offer would be around $210-15K.
$270K offer taking it sub2 is a VERY GOOD offer. This is about the maximum cash that they would receive if they listed the property conventionally thru a MLS real estate agent. At that price, I’d probably give them $5K or so upfront and the balance due when I sell the property (no time limit, or long limit of at least 2-3 years minimum). Actually, the more cash that they want upfront, the lower my offer would go (time is money, money is time).
realg,
There’s a book by G. William Barnett called “Are you Dumb Enough to be Rich?” It’s a terrible title and there is definitely some hype in the book, but it has some great advice on structuring deals exactly like what you’re talking about. Basically, DO NOT give them full price unless you can get in with no cash. Otherwise, get cash from private investors and heavily discount the price to compensate for the higher risk. If you’re seller is not willing to walk away from the deal without the $100k in cash, they aren’t motivated enough and you should be looking elsewhere.