Am I getting ripped off?
was just offered a deal on what would have been my first res. investment had I accepted, but It did not sound right to me.
I have an old friend (who used to be honest, I think) that owns a branch of a certain bank. This friend stated to me that he will help my bus. partner and I out with our first deal. So, we agreed to look into it. Bascially, he was giving us information on the house and got an appraisal as well. If we accept his offer he immediately wanted us to sign a contract stating that we have to pay him 20,000. I don't know what you guys think, but that sure is a lot of money for a little information. He gave us the appraisal with the address whited out. I don't know if this is standard procedure. He also wanted us to give the homeowner 50,000 to walk away with after we pay there debts through a loan we are getting from my him also.
Here are the figures.
Please take it easy on me, I'm sure that my estimations are wrong, but even if they are, I would still make little money.
MV (mint condition) 230,000
house appraisal 223,000
house offered at 115,000
profit without fixing 108,000
less (hmwoner cut) - 50,000
less (his cut) - 20,000
After everthing is added in together, holding costs, repairs, mortgage fee, and he also wants anther 10,000 on top of his 20,000 for finding the buyer and he is also recieving a big profit in the loan. My partner and I are only left with 2,000 dollars to split at the end of 4 months.
My whole point of this is, is he ripping me off or what? Not to mention that this house is in a bad area.
Please tell me if anything looks crooked here?
If anyone can and will help me with my estimations please email me at tjm528@aol.com">tjm528@aol.com
Your friend must think you and your partner are complete morons.
Rule number 1: don't ever trust someone else's appraisal, especially if info on there is whited out. Go to a place like homeradar.com and pull up your own comps and go to a real estate agent and ask them for comps as well.
Rule number 2: If your friend is suppose to be bird dogging, a normal birddog fee should only be about $500 for the lead. You simply ask your so called friend for the lead, and sign an agreement that if you close the lead, you'll pay him a $500 finders fee. You don't need to pay an additional $29,500 to your so called friend for him to help you close your deal.
Rule number 3: If your friend has the property tied up with a contract, than offer to have him assign the contract over to you. And you really shouldn't be paying him no more than about 5,000, or 10% of the equity, which ever is the lower of the 2, for him to assign the contract over to you.
Rule number 4: DO NOT TRUST ANYTHING THIS SO CALLED FRIEND OF YOURS HAS TO SAY. WHEN EVER HE OPENS HIS MOUTH YOU PULL OUT A PIN AND PAPER AND DOCUMENT EVERY THING HE SAY'S, AND MENTION THAT YOU AND YOUR PARTNER WILL INVESTIGATE IT AND GET BACK WITH HIM.
Rule number 5: do all you homework, including inspecting the property yourself, finding out what the owner actually wants for the property, a complete do it your self title search, JUST TO SEE IF THIS PROERTY IS EVEN WORTH INVESTING IN, IN THE FIRST PLACE. Not to mention checking out all the so called truths your so called friend told you, that you jotted down.
[ Edited by bparker on Date 04/14/2003 ]
Quote:
On 2003-04-14 02:17, tjm528 wrote:
After everthing is added in together, holding costs, repairs, mortgage fee, and he also wants anther 10,000 on top of his 20,000 for finding the buyer and he is also recieving a big profit in the loan. My partner and I are only left with 2,000 dollars to split at the end of 4 months.
He makes a pile of cash and if every thing goes perfect you make $2,000?
If you are even looking at this deal I will sell you all of the property that you can swing.
Your swiming in the shark tank and he is chumming.
Your friend is no friend.
I agree with everyone else that posted here.
I would reconstruct a proposal that cuts him out of the deal except a bird dog fee (say 1k or even less) and say, "this is what my parter and I propose". If he balked at your revised offer, I would even contact the owner and tell them to put the kabash on that deal and that you have a better plan for all involved.
That is a bit slimy, but your friend is just short of being a thief, unless the things you say arent the full picture of the events. ( I guess he isnt a thief if someone goes along with his proposal)
GL
Junior Investor,
Don't make your first deal your last! Don't get over anxious... as they say the deal of a lifetime comes around every week...
Your friend is crazy! If your friend has this property under contract tell him to assign it to you for $5000, PERIOD If he balks, I would walk.
He is crazy if he thinks any investor would touch this. Of course he will help you on your first deal... he stands to make some FAT CASH.
If you take this deal, I have some Beach Front Property in Kansas I would like to sell you.