Best Way To Rehab And Flip A Property
I have recently come across a property in a nice neighborhood that was your typical neglected property. The asking price is 240k and the comps in the neighborhood run from 270 to 280k. It needs cosmetics inside and a few new ceiling fans and light fixtures and some shingle work on the roof but nothing structural. I have estimated cosmetics to run about 10 to 12k. Here is my question: The best and least expensive way to tie up this property? Should I lease-option? Is there any way they could see the results of my labor and back out of the option and sell themselves and leave me out $12k plus a few months of payments? I've never pursued this angle so I was hoping some of you out there with more experience in this arena could point me in the right direction.
Thanks,
Mike
hi,
what were you thinking about bidding for the property?
as it stands right now, if you were to pay there asking price of $240,000 and if you said that fixing up would take about $12,000 that doesn't leave too much room for a profit margin. $270,000-$280,000.
Assuming you pay $240,000 and then sell it at $275,000 and you use a realtor their 6% commish is $16,500 which leaves $258,000 of which you spent $12,000 for fix up =$246,500 then closing cost.
I suggest that you would need to get the property at least 25% to 30% under FMV in order to make a nice profit and leave you some cushion for anything that might come up unexpectedly.
Just some thought.
Thanks for the heads up. I have a close friend that is a realtor/broker that brought this property to my attention. She will refund to me a majority of her 3% collect if I were to buy the property. She has spoken to the owner's and they have been transferred out of state and are highly motivated to sell, so I wouldn't go anywhere near 240k. I'm just trying to get the best way to gain control of the property and fix it up.
If your owners are out of state, they probably dont want to take the house back and cause you problems, but as long as you write the contract correctly and are adhering to your side of the deal, they aren't able to.
If you "get the deed", they dont own the house at all anymore.
Also, with a tenant buyer (who is buying tomorrow not today) you can charge HIGHER than market value. And you are making money on the monthly payments too, right?
So I agree that you should try to get the house for a lower price. Ceiling fans and roof shingles are about $20k in repairs, dont you think? And out of state owners are very motivated since their mortgage is still due. Try to get the price down a little more.
Then charge the tenant buyer $285-295. He isnt closing until next year.
Or charge him a little less and treat him like an owner, make him put in the ceiling fans and cosmetics etc. Roof should be done by you before selling, but can ultimately be paid for by him.
Of course you may need a motivated buyer too. Shouldnt be too hard.
If you are light rehabbing and quick selling or assigning contract, you may need more equity. So ask for it.
Just the way I see it.
N.