I have a seller who is out of touch with the market (in a good way), and because she has equity in the property, she is not pressed about the price.
I think the place is worth $160K to $170K, and I think I can buy it for $100K to $110K. It needs minimal repairs, at least from what little I know. Assume that major repairs, if needed, will lower the price commensurately.
So now I am like a dog who chases cars and then doesn’t know what to do with one when he catches it.
Assume for a moment that she will not do a “subject to” deal, what’s the strategy here? Should I put a contract on the property with a “weasel clause” about inspection? What is your opinion on these clauses?
I have a line of credit that I could close on the property if I had to, but that’s not my preference. As it’s my first deal, I’d rather just find someone to wholesale this to and make a quick few grand to plow into more marketing. Or maybe since I have the line of credit I should just close on the property then take my time to get closer to retail value?
Most newbies do not close on deals because they lack the credit or money or both. It is just a house with wood studs and carpet and a roof. Use your contract and weasel clauses and make sure of the rehab costs, the comps and how long to comps were on the market. Add in carrying costs and sales expenses as well as closing costs coming and going. Get some help with theses figures from a title company or even a friendly Realtor. Like the stupid Geico Insurance commercial: You Can Do It, Yes You Can. LOL
I don’t know if that’s a GEICO commercial, but I’m pretty sure my two-year-old son will say that it’s from “Bob the Builder.”
“Can we fix it? YES WE CAN!”
My issue is that I can find deal and number-crunch to death, but I need to get that first deal under my belt. Luckily, you don’t need too sharp a pencil to know that buying a property worth $170K for $110K should be profitable.
I’m just struggling with what to do with the property now that I have found it, but I think I have that solved. The seller wants to meet me tomorrow to write the contract for $110K, and I have access to those funds without having to pay traditional closing costs. I’m going to tie up the property, get a thorough inspection done, pull up some past sales, and go from there.
I thought that some people were opposed to weasel clauses, but if I make the earnest money small and say that the seller’s final recourse to me is to keep the earnest money, then I really don’t even need the weasel clause about inspection.
Sounds like you are on the right track. Still watch your costs. That $110K can end up being $120K and the $170K can easily slip to $160K and with rehab and carrying costs and commissions you can end up with zero or even worse. Sounds like your financing will help a marginal deal be a positive for you. I have to use hard money lends which costs 14% and 5 points, win, lose or draw they get their money bach plus the fees.