A viable low-risk flipping approach for newbies?
Am getting more and more information on the topic of rei on a daily basis and am very anxious to get started. My partner and I have discussed something along the lines of the following as a low-risk approach to getting started with rei, in order to get some cash flow so that we can start pursuing other aspects of it. Nutshell overview would be:
1. Find a motivated seller, perhaps with property in foreclosure or pre-foreclosure.
2. Appraise, ask questions, determine his equity, get local comps, get as much info as humanly possible.
3. Negotiate sales price with seller. Our $MAXOFFER price would be $FMV - $15k - (20%-25% of $FMV) - $REHABCOST - $CLOSINGCOST.
To explain, we are looking to make say $10k-$15k per deal. After it closes, we would do a double close where the property would be flipped to an investor who is looking for at least 20-25%. Does this seem valid?
In negotiating price, we would of course start lower, but no way nohow would we exceed $MAXOFFER. If not, we walk.
The price that we would offer to sell it to the investor for would be calculated as $FMV - (20%-25% of $FMV) - $REHABCOST - $CLOSINGCOST.
Our profit is already figured into the seller equation, basically the investor equation is the same but without our profit margin mixed in.
As a basic outline, does this make sense as one of the easiest and lowest risk ways to get started in REI, especially if the amount of "out of pocket" money that we have initially is extremely little.
If not, can anyone suggest a similar type of outline for an alternative approach? Thanks.
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