Newbie Deal Question
After sending out my first set of letters to pre-foreclosures, I had an appointment this morning. Here are the details...
3/1 in a hot area. Needs to be renovated. One mortgage for $136,000. Back taxes for $450.
Other houses in area that need renovation seling for ~ $180,000.
I am wanting to get this and wholesale it to someone else.
They have had it on the market with a realtor for $259,000. Nothing - of course.
The daughter said she wanted $205,000. By the end of the conversation, I told them that I could probably pay the $136,000 mortgage and get them $10,000 cash in equity. She's an older lady who has done the foreclosure thing 15 years ago. Does not want it to go to the Feb 3rd date. I told her I needed to know by Monday (only so much money to work with and would buy somethng else). I was just at the grocery and she called me. Said she wanted to make sure she had the right numbers for the right people. She also said that a couple came by today also and made no offer. She keeps saying she doessn't have a lot of time etc.
Should I just sit back and wait till Monday and see. Or is their some other tactic. Should I call and say that I am no longer able to get the $10,000 I thought I would get after all and offer her $8,000 to put the pressure on.
Obviously this would be my first deal. Thanks for the help. 
whats your exit strategy? what price are you planning on selling at?
just a couple that come to mind, being new myself it sounds good to me. Best of luck to you on this deal. Let us know how it goes.
Dave
My exit strategy is to assign the contract to someone else right away.
If the deal goes through with these numbers, what I don't know is how much to ask for from the investor.
Any thoughts?
This is where I get stuck too...
I think I would get some comps on the retail price, then make sure you leave enough profit for the investor to make money. Make it a win-win.
It may or may not be a good deal to flip to another investor. It depends on how much in repairs the house needs. If it needs extensive fixing up, then I would buy it, fix it, and sell it myself. If it needs minor repairs (paint, carpet, etc.), then I would flip it for a reasonable price. Here is an example, if the property needs at most $5,000 in repairs...
COMPS = $180,000
Balance = $136,000
CASH for Equity = $10,000
Repairs = 5,000
I would flip it to another investor for $151,000. You would get a $5,000 or 50% return on the $10,000 you paid out for their equity. The investor would shell out the $5,000 to fix up the home and make $24,000 after selling it.
In order to do a quick flip, you should leave enough profits for the investor to consider taking off your hands quickly. If it needs more than $5,000 in repairs, then I would buy it, fix it, and sell it myself. It's up to you to decide what to do with the deal. Just remember that you need to get back the $10,000 you shelled out for their equity before you make any profit.
Tanya[ Edited by tanya1215 on Date 01/16/2004 ]
Thanks for your help. I hope I can get more than that...
Houses that are in need of a pretty serious renovation are selling for $180 in the area. Houses that have been renovated are selling for $250 and up.
If I can get the house for the $136,000 plus the $10,00 in equity at closing (not out of my pocket - part of the contract that an investor purchases from me), I think there is enough room for us both to make money.
I'm just not sure how much to sell this contact for (if I get it).