Constructing First Offer.
Okay, here is the situation. Subject is about 5,000 sf single family with an apartment, needs about 35 to 40 in rehab work.
I am not interested in buying it to rehab, but in getting an option on it and selling it to an investor who wants property within two miles of the local college.
After repairs, it should roll, if kept single family, for about 200k.
Already talked to the owner, he knows what it is assessed for, but overestimated the repairs by about 10k. He just wants an offer, taken from the assessed value, and subtracting his estimate of repairs, he is talking about around 80-90 k.
I've found three properties near this college, none are on the market, all are sitting vacant, and all three just want offers. No set prices, they just want to get rid of them. I know the values and estimates since I am an appraiser.
But now I am trying to figure out how to take the next step. Double closing? Option agreement? Now I am stuck trying to figure out what to do next.
The big house I can probably get a good deal on, but it is trying to find a buyer who wants to tackle a job like that. Any advice/recommendations from the guru's out there? This is my first deal, and I am really wondering what to do next.
from newbie to n00bie
<shouting like a 5yr old>"My mentor told me that for me to do a rehab job on my first deal is a big NO NO!"
well i kno that your not doing the rehab, just wanting to get it under contract and assign it to someone is what it sounds like. Hrm.... may i suggest you find a partner/mentor you can turn the deal over to and basically have them teach you on what they would do. you may just get a finders fee but at least your learning in the process. Jus watching how they would structure the deal is pretty interesting and will open up your mind a bit more (i mean no offense by that, jus that you can probably learn a bit more) but ne way to your numbers...
you said that guy is looking for around 95k for the thing and estimated repairs are around 50k... which puts your grand total to 145k which is about 75% of ARV...(to my knowledge, you want it to be around 60-65% ARV with rehabs, everyone has their own pref's)
i would offer 55k now and mabye 10-15k after you sell... depends on how much money he is asking for now. find out how flexible he is in terms... if he wants his price... then maybe take 65k now and maybe the rest after the sale... if hes not flexible with price, then maybe he'll do terms, if not terms then price... if not either, then "I'm sorry, we have no deal here. Thank you for your time." and move on...
"you cant have your cake and eat it too"
dont take it from me tho, i'm still a newbie too.
[addsig]
Actually, the fifty k for repairs is his estimate, and I think he is about 10 to 15 k higher than needed.
I am pushing the sixties, but I think that I can get it for lower. He sounds disgusted with it. He bought it 19 years ago. It has sat vacant for several years, and he has not tried to sell it since it needs work.
i would estimate higher than what you think becuase with rehabs, there are always more than you expect in costs... jus something for you to consider. and yes try to negotiate price and terms with him... if hes disgusted, then make a killing. rofl
[addsig]
Making the killing is the hard part. It is my first deal, and I am looking for a mentor/partner in the area that knows how to do this right.
I would rather have to split the profit on this deal and make it work than go to the meeting and blow the deal.
I am not worried about talking to the owner, nor am I shy, but I also know that I am not experienced in this, so I am trying to find out all the different aspects that I am facing.
Finding a buyer who specializes in rehabs should be fairly easy, since in this area of Georgia the property values are just beginning to climb, and a lot of people/businesses are buying these type of properties.
Unfortunately, I don't have any idea of buyers who do these types of properties and look for them.
I know a few private investors, but they are all in the early stages of starting and a job like this, although it will be profitable, is way more than the newbies I know want to deal with. So, I am trying to figure out what to do next. How do you find a mentor/partner who is willing to work on a project?
As far as my estimate, I added ten percent to make certain that I had a little rubber room, but I understand going off his estimate is probably more realistic.[ Edited by benluby on Date 12/18/2003 ]
where abouts in GA are you, i know that atlanta has a huge investor party every now and again so i'm sure if you advertise it there, there is bound to be investors there that rehab.
i mean the monthly meetings btw... lol
i hear that atlanta has about 3k members... so it shouldnt be too hard for you... for me its only about 250... heh, not much here but thats good in a way... less competition and more working room.
since in a way i am you and beginning, i'm doing preforclosures and NonOccupantOwners right now... for newbies, i figure thats the easiest route to go. i'm saying that you should look into it too, rehab stinks like the rotten wood that comes with the house, but some ppl like it... and if you want to do rehabs then thats great, but my suggestion is to maybe get it under contract for 55-60k... assign it for an ez 5-10k and move along... less work, more $$$/hr spent you have money to work with for you other investment... rehabs take a long time, and stressful, and money put in... you dont even really know how much your getting out... so its risky with rehabs... allz i'm saying is make use of your time as a newbie and learn more and think smarter...
you dont want to become a motivated buyer. there is a deal to be had but maybe another day when you can tackle a big project like this.
[ Edited by ahabion on Date 12/18/2003 ]
You just nailed it. I am going to explore the other options you mentioned as well. And, as stated, I would happily walk from this deal for a five-ten k profit and let the new buyer have all the fun.
I went to the GAREI meeting about two months ago, learned a lot.
Got me motivated to try this finally and I am now hitting the ground hard and working like a maniac at getting the deals going.
I am aware that this is a good deal, but it is a deal for a person with a lot more time and money (Just ended my job, so money IS an issue), to do this with.
But, if I find no investors/buyers, then I will just walk from it. It will probably still be there in a few months.
Dont waste time, make your best all cash deal subject to inspections, put your close as far out as possible get as long as you can to do inspections then market the property. When your offers come in you will know if there is really any margin in the deal. If the offers come low then you know where you need to be when your inspection period is up. There is no reason to ever own this house let the next guy have all the fun as the other post said.[ Edited by rickomarsh on Date 12/18/2003 ]