About to Test the Waters

[atl30349]

Hello all, I have been watching the post for a minute and gathered some valuable information.  I'm hungry and I'm going to attempt to get the groceries...lol   Please give me your input and advice.  Thanks in advance

Rah

Deal:

Asking Price is 94,900.00

ARV           133,000.00
                          x 90%<----Leaving 10% equity for the buyer!
                  $119,700 <-----Sale Price
                  $- 13,000<----- Repairs and fees/expenses
                  $106,700.00
                       x 60%
                       =74,690.00<----- My offer amount


13000 + 74,690.00= 87,690.00<-----Est cost for rehab

119,700(selling Price)  -  87,690.00(costs) = 32,010.00 est profit

I feel its a workable deal, but I just want to get some suggestions before submitting it to any investors.  All help appreciated

[kdhastedt]

You've got some "fuzzy math"...do you work for the government?  LOL

60% of $106,700.00 is $64, 020, not $74,690 -- perhaps you meant "70%" and mis-typed...?

This is a very odd computation...normally it is:

(ARV X 70%) - (Repairs & Holding Costs) = Max Offer

That would be $80,100

Questions:

(1) How sure of your ARV of $133K are you?  How was it obtained/derrived?

(2) How long do you expect the rehab to take?

(3) What holding costs have you factored in?

(4) What sort of rehab needs done?  $13K is not a lot of rehab money.

(5) What is the "10% equity for the buyer"?  Is it your intent to fix and flip to a wholesaler or fix and flip to an occupant?

Keith

[EAlston]

How do you determine what the after-repair-value (ARV) is?  Especially when the asking price is usually the high end of (or above) MARKET VALUE??

[IndyBruce]

You need to find someone with access to the MLS. A Realtor is your best bet. Have them pull comps. Comps are what properties have SOLD for. These properties need to be comparable.  As in the lot very close to the same size, close to the same square footage.
You know 2Bed/2Bath/2Car attached 1150sq Ft.
Then you must do a drive buy. Make sure the comps are good comps

 

Bruce

[EAlston]

Do you know anything about dealing with multi-family properties (apartments)?  I have my eye on property that contains 2 1-bedroom apartments.  I wonder if I could sell each tenant his or her unit as a condo or a co-op.  That way, I would still own the property as a whole, they'd pay their mortgage and be responsible for their own utilities and for the maintenance of their unit-- and pay me a monthly maintenance fee for stuff like trash removal and external building up-keep.

How would I do it?

[millunare]

EAlston,

    I guess your talking about a duplex right?

    I really dont know of a way to go in and sell two people a half of it considering the property has one deed.  Maybe if it was rezoned but I believe one of my friends were trying that and it got shot down.  But really what would be the reason for doing that?  One side of a duplex usually will cover close to all of the mortgage and the rest is profit and misc.

    You may just be better buying it as a rental.

[henryinma]

Wow EAlston, I think that's the real estate equivalent of having your cake and eat it too being described.

Normally you would buy the duplex and then convert them to condos. State laws vary on condo conversions some make you wait a year if there are tenants and they have the right of first refusal before you can convert (so you buy it empty). Now there are lawyers, architects, registry fees etc. so maybe it costs $5-10k to do all that dending on the prices in your area for those people. So once you have them as condo's and you sell each condo to each tenant, you no longer own the property! There is no owning the property as a whole as each condo owner owns part of the property! You would just be the management firm and the condo board could just vote to fire you if you didn't have a majority in the condo board.

[Christine Bowen]

I have a finance guy that will refinance me the day after I purchase the investment homes for 90% of the REAL MARKET VALUE.  Alot of times, I get enough Cash Out to cover all of my Rehab costs.