Help, Help Fast!!!!!
Guy wants to flip me a house to rehab this is what he says. He bought te house sub2 for 61k, wants to flip it to me for 71k
says it needs 6k in rehab and a recent appraisal as is was 95k, 104 fixed up. The investor wants 31k upfront, 10k for him and the owner needs 21k next week. The remaing 40k upon seling the home. I have the cash but wanted to get feedbackfrom this site before I move on. Any cautions with this deal?
I have to sign on Monday!!!!
Are sure of the numbers, have you checked the place out yourself, check title to see if he really holds the property, and see what kind of lien the seller has...sounds like he maybe getting the place for much less than the 71K and has an urgent need to dump the house. He should not 50k on you for wholesaling the property on a quick flip, seems like time is on your side in this deal, so i would press him. Investigate the deal, also make sure to check the place out thoroughly before accepting the deal, maybe something wierd going on with the deal.
If that's the case, I would go lower than 71k.
If you give him the 31K, I wouldn't pay no more than 60K for the property. If he needs the money fast, and everything is what he says it is, I would go through with it but only at my price.
65% of the after repaired value (ARV)
minus repair cost. this is the formula I would use when buying fixer uppers.
What concerns me is the sub 2. I have not had dealings with this. The guy is a memeber of our local REI club seems to be on the up but due to my lack of knowledge, I am unsure. 31k out of pocket is a lot of money. What questions would you ask the investor flipping the property?
WHy does he want 10k up front? If your buying the property from an assignment, then he is already getting paid. He's trying to get a finders fee, plus the assignment price for the contract. I may be jumping the gun, but he may be trying to take advantage of you
Eric
[addsig]
Any more takers on this one?
Always try to negotiate the best price you can, especially with that much cash. If he is asking $10,000 flip fee try to cut that in half or less especially if they are needing quick money. Always blame the condition of the property or market. Do make sure of the numbers. The rule of 65% to 70% of retail is steadfast. Be sure of any title problems before writing that big check.
The subject 2 thing is not that big of a deal ecpecially if you are going to rehab and resale with new loan later. There are a lot of guide lines in the sub2 section some easy and some a little too much.
Hope this helps some
Ted Jr
Quote:
On 2003-11-22 18:35, frazierp wrote:
Guy wants to flip me a house to rehab this is what he says. He bought te house sub2 for 61k, wants to flip it to me for 71k
says it needs 6k in rehab and a recent appraisal as is was 95k, 104 fixed up. The investor wants 31k upfront, 10k for him and the owner needs 21k next week. The remaing 40k upon seling the home. I have the cash but wanted to get feedbackfrom this site before I move on. Any cautions with this deal?
I have to sign on Monday!!!!
I would proceed with caution on this deal. The numbers that you quoted just doesn't add up for me. The investor/wholesaler needs a total of 31k from you and 10K of that up front? No deal man! Okay you say that the house is worth 95K AS IS. There's 6K in repairs, 31K to purchase house for a total of 37K out of pocket. After purchase, what's your exit strategy? How will you recoup your 37K plus make a return on your money? the 37K doesn't even mention holding costs while doing the repairs, advertising to sell the property. I would find out how much the Owner still owes on the house. If there is a loan balance I would spend more time negotiating with this investor to do an assignment of contract. Same thing if the owner owns the house free and clear. Just make sure you have all your doubts and concerns answered before dropping that much money into a deal. I can buy several houses sub2 with that type of money..lol..remember the focus in creative REI is making a good return off of your investment. Good Luck!!
"I have to sign on Monday"
Somehow you are on the wrong end of the deal. You are looking for a deal you can do on your terms where the other guy "Has to ...".
Just for giggles don't do it. Instead propose various delays and see what happens. Resign yourself to the idea that you wont get this one and just play poker. Maybe the deal will get better. In any case it will be an opportunity to try to develop the right mind set.
I agree with you all, If it don't feel good then simply walk away and that is what I did. Looked at the property yesterday,, sit's right on a 4 lane highway, extremely busy, comps were pulled from nieborhood off of busy street, 6k in rehab turned out to be about 10-12k. Realizing this after the sliding door almost fell on me. So, not a deal form.
I wanted to say thank you for your post.
It menas a lot to us little guys and hopefully as I progress, I will be able to return the favors to junior investors
Pat