I Found A Deal....now What?
Hello All,
I have started my marketing system and have been getting a steady stream of calls of other investors trying to dump properties on me, people wanting to buy houses and the occasional seller.
I was contacted by a seller willing to let go of her house for cheap
Motivation: She purchased a property from a homes depot expecting it to be renovated by closing and ready to rent out. But the company renovating the place hired cheap unqualified labor and the ended up doing a very sh*tty job. For instance, there are oddly shaped rooms, poorly done tiles in the kitchen etc....
She took the company to court and the judge ruled in her favor, and decided that she has to short sell the property and receive damages from the selling company.
here are the #'s:
price - 305,000
ARV - 375,000 - 400,000
Repairs 25,000 - 50,000 (need contractor to look at it)
Holding time - 2 - 3 mos
What course of action would you take on this deal? Are the profits too slim? Is this a deal that should be left for a more seasoned investor? Do you see an opportunity for an assigned contract?
Thanks in advance for your help!
Robin
**Please See My Profile**
Seems slim to me. How did you determine ARV? How did you determine repairs?
And holding costs? I would assume 3-4 months, with $50k of work. $25-$50k in repairs is a BIG swing, and those estimates should be honed more.
Not the best deal, but could be ok if you are able to get more clear on the numbers.
Beware of investors looking to dump properties on you, you don't need their headaches!!! Plus, they are probably looking for a sucker, or looking to assign properties to you.
Are you a rehabber? Best, Dave
I agree with Dave. I think you are looking at least a 9 month holding period. 3 to 4 months to renovate, 3 months to sell and 2 months to close.
BUMP!
I am still waiting for the estimate from the contractor that looked at this place (She has been very flakey so far) and looking for a contractor to get a second opinion from. But in the meantime I was wondering if there was a way I could do a double closing before rehabbing to quickly get money out of this deal. Is there a problem with double closings and short sales? Any advise of how to creatively make this deal work would be appreciated.....Thanks.
Robin
I don't believe that there is enough profit to be able to flip this. It might be worth it if you could do all of the work yourself, but it sounds like you have a need for a better contractor. You need one that is very responsive and that can get in and get out FAST.
i would pass. to little margin. i don't like the sound of a court ordered forced sale from poor workmanship. ggod luck. kenmax
Thanks for the advice guys. I forgot to mention that the price of the place is 290K. There was an error in my first post when I said 305K. At what price would you pull the trigger on this deal? I am going to try to get the bank to accept 260K, would this amount change your opinions?
IMO
i believe that you should scratch this deal out. for one, if this is one of your first deals, then i suggest you stay away from rehabs PERIOD. they are time consuming and may get expensive really quick. And from what many others have told me, its very stressful when doing rehabs. i would stay away from them unless you really wanna specialize in rehabs.
jus what i think.
[addsig]
Robin,
A couple of things.
First, I think you need to take a closer look at this deal. A 25k spread in ARV is a lot of money to consider. When you figure out your ARV, you need to come up with a firm number on the lower end of FMV. Why? Because you want the property to move quickly if you intend to sell it. If you intend to rent it, you want to have slightly less than market rent to fill it up fast.
Second, the 25k spread in estimated repairs is huge. Doing a rehab is tricky, especially when you are fixing someone else's sub-standard work. You need to come up with an itemized list and a firm commitment from a contractor if you don't intend to do the work yourself. Always estimate your repair costs a bit high, because you will always spend more than you mean to.
Ok, after you figure those numbers out, here is a pretty easy formula for you to figure out if it is worth it.
(ARV*.65) - (Repairs) - (Holding Costs) - (Closing Costs) = Offer Price
Ex: If your firm ARV is 375k, and your firm repair costs is 35k, holding/closing costs at 20k, you should not purchase this property for more than 188.75k! This offer is low but will ensure that you end up making money on the deal. At this price you should be able to secure hard money loans in case you don’t have cash handy or the place doesn’t qualify for conventional financing. You can use this same formula and target 70%, 75%, or 80%, but as you increase your offer, you decrease your profit and probability of success. I assume you are fairly new at this (as am I) and taking a sure winner is much better than flirting with disaster.
Of course, this is just my personal opinion. Take it for what it is worth
-Chris
[addsig]
ok, ok Thanks for your opinions guys, I will step away from this deal, and look elsewhere. I will follow through with the contractor just to get a handle on how rehabs go down. I guess deals are so few and far between in NY that I was ready to jump at my first chance. Thanks again for the advice......
Robin
I didn't suggest you step away from the deal. It will be good practice for you to follow through. Just don't offer 300k
-Chris
[addsig]
There are plenty of rehabs in NY. NYC is much tougher than other parts of the state. I started making a lot more $$$ when I ventured upstate a bit.
I refuse to let this deal die!!!! I finally got the estimate from the contractor and she estimates 28k in repairs. Nothing too spectacular here, but the bank is tired of waiting for the seller to do the shortsale and has started the forecluse proceedings(I noticed the property on one of my lis pendens lists). I have been in constant contact with the seller and have really been truely trying to help her along the way, but I am sure she will be bombarded with investors trying to get at this deal(So the quicker I help her the better).
mortgage is 359K
ARV 400K
28K in repairs
How would I go about putting together a short sale packet detailing the costs associated with repairing the property for the short sale? What is the maximum you would pay for this property? How low should I make my initial offer so the banks counteroffer will be in an area that I want? Your advice is needed, Fast!!! Thanks in advance......
Robin
Bump....any shortsale advice?
BUMP
Seller was in the drivers seat with the short because of the legal action she took against the previous owner. House is being foreclosed now, how do I get in the driver seat? I want to be able to do this right and quickly. Any advice is greatly appreciated.
Robin
Hi,
I understand what you are wanting to do. My advice: take it as far as you can, you will learn a lot any way.
If it's in foreclosure, you don't have much time to do a short sale. It's more like you have to get the right person on the phone who is assigned this property in the loss mitigation dept. and say look, I will by this property from you for $X -- my offer will be faxed to you and you have 24-48 hours to make a decision or I walk.
They already have their comps, repairs, ARV etc., etc., no reason for you to spend the time doing it for them, you need to know for yourself . . . they know what they will and won't take. Most say start at 50% of value.
Now this is more complicated with the court being involved, so you need to get some good legal advice from someone who knows real estate investing and the law. I'd call every investor I know, starting with the biggest dogs you've ever seen or heard of, and ask for a referral to a lawyer, tell him the story and do what he/she says.
Short version is how many days till the sale, you have to have an agreement 5 days before it happens to check title, etc. You may already be out of time. But you are learning!! After a couple years of seeing deals slip through my fingers I am able to focus and go for the jugular (figuratively speaking!) like a German Shephard.. When I find a deal it's MINE and I gotta get it before someone else does. Mine, Mine, Mine, like the seagulls in Finding Nemo . . . only with authority. You're on the right track, don't let people scare you off but learn to work the numbers.
best of luck
Shelly in GA
Thanks for the advice Shelly. It feels good to know that I am on the right track. I am 24yrs old and trying to "wheel and deal" as I learn what it takes to make a deal work.
Back to the subject, in NYC it take about 6-12 mos between lis pendens and auction date, so I think I might have enough time. Wish me luck.....
Robin
I nearly gave up on this deal, I was tired of waiting for the seller to get back to me when she finally did. She is close to negotiating the debt to less than 240K on this property. Does this sound good considering an identical house next door sold for 419K and I got a 35K repair estimate on this property?????
Thanks.
Robin
Bump
I got a reply from the seller. The bank agreed to 245K. Does this deal make sense?
RECAP:
I refuse to let this deal die!!!! I finally got the estimate from the contractor and she estimates 28k in repairs. Nothing too spectacular here, but the bank is tired of waiting for the seller to do the shortsale and has started the forecluse proceedings(I noticed the property on one of my lis pendens lists). I have been in constant contact with the seller and have really been truely trying to help her along the way, but I am sure she will be bombarded with investors trying to get at this deal(So the quicker I help her the better).
mortgage is 359K
ARV 400K
28K in repairs
How would I go about putting together a short sale packet detailing the costs associated with repairing the property for the short sale? What is the maximum you would pay for this property? How low should I make my initial offer so the banks counteroffer will be in an area that I want? Your advice is needed, Fast!!! Thanks in advance......
Robin
Get a purchase and sale agreement signed by the seller along with an "Authorization to Release Info form".
Have this signed by the seller so you can talk and negotiate with the bank ( loss mitigation ). Request a short sale package from the loss mitigation department and have the seller fill it out.
Write up a hardship letter explaining why she is requesting a short sale, have a hud1 prepared,throw in some low comps,throw in a financial statement from the seller , pictures of the bad work in the house and don't forget the purchase and sale agreement which should have your initial offer amount on it. Make the agreement contingent upon the banks approval. Make sure you low ball the bank with your first offer. I would start at $145,980.13. For future reference, buy a short sale course and study study study. Hope this helps!
If you want the shortest education possible, buy or borrow Ron Legrand, Jeff Kaller, or the women from SFL's (Dawn and somebody) short sell course. Everyone has their own angle, and many will not agree to the letter with these guys. But there is not an easier way to get a cram course is short sells.
Brenda
First, determine wether the seller is really motivated. (Does not sound like it).
If she is, then offer a short of 300k. The seller is not going to get a penny, nor should they. If the bank agrees to the 300 then go for it, if they want more, or the seller is not mallable then walk away, as stated before, the margins are pretty slim unless you get a better deal.
[addsig]
Hi Robin,
The last I heard, you can't do deals in brooklyn, no one sells homes cheap there In any event Congratulations on the deal and for proving the naysayers wrong. Is the deal doable? It's tight right now, but you may be able to make something work with it.
Can you get it for less? Can you get it financed for 2-3 months with no interest. Free financing for 90 days saves a whole lot of money and makes a deal more attractive.
Blessings,
Steve
Quote:
On 2003-12-17 13:55, brooklyninvestor wrote:
Hello All,
I have started my marketing system and have been getting a steady stream of calls of other investors trying to dump properties on me, people wanting to buy houses and the occasional seller.
I was contacted by a seller willing to let go of her house for cheap
Motivation: She purchased a property from a homes depot expecting it to be renovated by closing and ready to rent out. But the company renovating the place hired cheap unqualified labor and the ended up doing a very sh*tty job. For instance, there are oddly shaped rooms, poorly done tiles in the kitchen etc....
She took the company to court and the judge ruled in her favor, and decided that she has to short sell the property and receive damages from the selling company.
here are the #'s:
price - 305,000
ARV - 375,000 - 400,000
Repairs 25,000 - 50,000 (need contractor to look at it)
Holding time - 2 - 3 mos
What course of action would you take on this deal? Are the profits too slim? Is this a deal that should be left for a more seasoned investor? Do you see an opportunity for an assigned contract?
Thanks in advance for your help!
Robin
**Please See My Profile**
Who is "BUMP"?
This deal sounds like it is getting better. Who is negociating the short on this, Did I read right....the seller?
What type of house is this a SF,TH,Condo or Co-op? Since this deal looks www.doable.IT may pay to partner with the owner and split the profit after repair,holding,and short sale price from bank.
Live where you want. buy where it makes sense NY does not make sense