Please help with a number crunching example so I can understand better...

[matter2003]

OK, I have a hypothetical situation where I have located an owner who is wanting to sell their house.  No issues with the house, it is in a nice neighborhood, etc.  He wants to get out quickly.  House is valued at 106,000, he is trying to sell for 90,000. In this area, house likely isn't gonna move at that price.  If I were looking to get an option on the house and sell it to an investor, what kind of price would I be looking to offer him?  What type of return does the typical investor look for?  Would it be possible to flip this house to an investor for say 85K if I were able to offer him 75K and pocket 8-10K? 

Just wanting to get a better grasp on just how much investors are looking to buy for under value....

Thanks,

Matt

[Gold River]

Hi,

    In a really appreciating market (over 10% a year) with a very low DOM (Days on market) number I have bought for as little as 80 cents on the dollar, in a good market with little appreciation I have bought at 75 cents on the dollar and in a declining market I will not go above 70 cents on the dollar. (Plus a deduction for buying cost's from the seller, as I pay my selling costs out of the percentage)

Now let's quanitate that we are talking pristine property, does not need a single thing inside and out, has been remodeled or upgraded in the last 5 years and is in a move in condition.

Any repairs even as simple as paint and carpet have to be deducted from those percentages and deduct your buyers closing cost from those numbers and you have what I could pay, now for you to make a profit you have to deduct your closing costs and what ever percentage of profit you want from the deal.

I would not touch a property worth $106k where the seller can't find any other buyer but you today for any more than $62k and more likely my comfort level would be about $60k, which basically means you would have almost $1,500 just to close a sale to me and that means your purchase would have to be $50k to buy, close and make about a $5k spread between seller, yourself and another investor to buy from you!

This ought to tell you something when the seller is asking 15% below FMV just to get an offer on his property and I am going to guess he is not going to take $50k for you to wholesale it to another investor, and since you seem to be the only interested buyer I would be leary even thinking it's worth $106k.

This could be a property for you to retail over to an end buyer, but that may be rough because I think for you to even do that you need to get it for $65k yourself, and something tells me your seller is not prepared to allow an investor to buy and resell his property at $65k?

Good luck,

                  GR

[Delondon]

You better go as low as you can. You should feel ashamed with the offer you give. The seller will make a counter if he wants it sold. If he counters close to where you are at, then he will take what you give him. Just make sure you go low baby low. If he don't take it, check back with him in 30 days.

Man....Gold River ain't bullin around. 50K I feel ya. 

[bivsflips]

65% -70% ARV-Repairs-holding/closing etc costs-fee= Offer ( and yes it will be low).

106000-70%=74200-10,000 for repairs clean up holding closing listing etc -5000(my fee)=59200

59,200 and start your offer at 50,000 and work up to 59,200

In my example you can substitute the 10,000 with whatever number you come up with after looking at the property.

The deal as you have it in my opinion is not a deal my buyers would even consider.

[THATREIGUY]

Or you can be creative and try owner financing and wholesale the owner financing contract or stay in the deal.... EXP> still negoiate a low price find a buyer for more then your price take a down payment from them subtract your fee and give the rest to the seller as the option fee what ever monthly payment you and the seller negoiate make it higher for your buyer and that will be your monthly spread and when the option ends and the buyer is ready to buy you will make the difference between what you bought the home for and what they bought it for from you its called a sandwich lease option.. Or you can neogiate the terms of the owner finance deal with the seller get it under contract and sell the contract(wholesale) for a fee...   

[xpandergt]

OK, I have a hypothetical situation where I have located an owner who is wanting to sell their house.  No issues with the house, it is in a nice neighborhood, etc.  He wants to get out quickly.  House is valued at 106,000, he is trying to sell for 90,000. In this area, house likely isn't gonna move at that price.  If I were looking to get an option on the house and sell it to an investor, what kind of price would I be looking to offer him?  What type of return does the typical investor look for?  Would it be possible to flip this house to an investor for say 85K if I were able to offer him 75K and pocket 8-10K? 

Just wanting to get a better grasp on just how much investors are looking to buy for under value....

Thanks,

Matt

Where is the value? The house is worth 106k and  he wants 90k? He owes too much on it. Even under an option, there would have to be a hell of a lot of appreciation to make that a good deal and considering the the current market, I don't see that happening. The best way to find out what investors are willing to pay is to ask them directly. Each investor work on different numbers. Borrowing and holding costs are different. Some factor in rehab costs while other use their own labor at cost.

[Delondon]

Way to much, I still did not see home much in repairs were needed. Gotta provide all stats for us to give you an honest answer.

[nsu1997]

matter2003, you need training. Not trying to discourage you at all, but you should be able to instantly recognize that this is not even CLOSE to being a wholesale deal at those numbers. As others have stated, in this type of down market we're currently in rehabbers are looking for steals. This seller is practically asking retail price.

[Delondon]

These days, you have go hard or go home!! I honestly have to hold my tongue to some of these cocky sellers.
I am like " Bro! You are not going to sell this house at that price!!! Stop being greedy and come down on the price. Messing with me, I will let you keep paying yearly taxes on this piece of crap house!" lol I am sorry, I was showing a student how to do some seller screening on  some super dumb sellers earlier. Had to vent. I am good now. 

[xpandergt]

These days, you have go hard or go home!! I honestly have to hold my tongue to some of these cocky sellers.
I am like " Bro! You are not going to sell this house at that price!!! Stop being greedy and come down on the price. Messing with me, I will let you keep paying yearly taxes on this piece of crap house!" lol I am sorry, I was showing a student how to do some seller screening on  some super dumb sellers earlier. Had to vent. I am good now. 

Delondon, I get that all the time from Sellers here in Baltimore. It's like when they call me they think they are doing me a favor. I break the news to the real quick that as an investor, I don't pay home buyer prices. If they can't accept that, they ought to consider listing their property with an agent. My thinking is that I do a lot of marketing.

When one phone call ends another call rings.

[REIMillions]

Would it be possible to flip this house to an investor for say 85K if I were able to offer him 75K and pocket 8-10K? 

Hi Matt,

Typically you want to get the numbers in the area of 30% below market value or more. Some investors buy at 20-25%, but they are also harder to find. It is just not worth it to the average investor. Especially with the economy the way it is. They have to take into consideration holding costs, repairs, maintenance, and the list goes on. In the end they are also going to want to make a buck or two and make it worth their time.

You know you are sitting right if you can at least sell at least acquire it at 30% below market value or more. In addition, you are going to want to take into consideration your assignment fee. You want to know that the investor is going to still get it at 30% or more below market value with your assignment fee already out of the way.

Let's say the known value of the property is $106,000... This means that you would at least need to purchase the property for $74,200, for a quick cash buyer to want to buy your assignment. In addition, you want to consider taking your assignment off of the top. Let's say you decide to charge $3,000 on your assignment. This means you need to get the property at $71,200 or less.

Remember the lower you can get it the better. The numbers you have stated are not even close, but with the proper negotiation you may be able to sway your seller in to an agreement. You have to know how to sell them on the advantages. If your seller would not even consider it then it's time to move on. Your just wasting his time and yours and there is way to much money to be made to play games.

Best of luck to you!!!

 

[nsu1997]

Would it be possible to flip this house to an investor for say 85K if I were able to offer him 75K and pocket 8-10K? 

Hi Matt,

Typically you want to get the numbers in the area of 30% below market value or more. Some investors buy at 20-25%, but they are also harder to find. It is just not worth it to the average investor. Especially with the economy the way it is. They have to take into consideration holding costs, repairs, maintenance, and the list goes on. In the end they are also going to want to make a buck or two and make it worth their time.

You know you are sitting right if you can at least sell at least acquire it at 30% below market value or more. In addition, you are going to want to take into consideration your assignment fee. You want to know that the investor is going to still get it at 30% or more below market value with your assignment fee already out of the way.

Let's say the known value of the property is $106,000... This means that you would at least need to purchase the property for $74,200, for a quick cash buyer to want to buy your assignment. In addition, you want to consider taking your assignment off of the top. Let's say you decide to charge $3,000 on your assignment. This means you need to get the property at $71,200 or less.

Remember the lower you can get it the better. The numbers you have stated are not even close, but with the proper negotiation you may be able to sway your seller in to an agreement. You have to know how to sell them on the advantages. If your seller would not even consider it then it's time to move on. Your just wasting his time and yours and there is way to much money to be made to play games.

Best of luck to you!!!

 

Hi REIMillions, I'm finding that rehabbers are looking for absolute steals, and 30% below market value ain't cutting it these days. Of course your market may be different but here (DC metro) and in most other locales I'm familiar with, most rehabbers won't consider anything over 60% LTV minus repairs and assignment fee. However if you're dealing with a FSBO and you're putting up a $10 deposit I guess there's really nothing to lose other than $10. I'm wholesaling REOs and I want them under 50% LTV before my fee.

[REIMillions]

Hi NSU1997,

You are absolutely correct. 30% below market value isn't as much as it use to be these last few years, however, there are still many investors that are ready willing and able to buy them up pretty quickly.

They will definitely work, but obviously the more discounted they are the faster they flip. At 50% below market you'll have a buyer within a day if you've built your list. At 30% below, you still have buyers, but they may take up to a week to decide and it's still "ify" whether they will close or not.

Here in PA they are still going pretty fast.

Would it be possible to flip this house to an investor for say 85K if I were able to offer him 75K and pocket 8-10K? 

Hi Matt,

Typically you want to get the numbers in the area of 30% below market value or more. Some investors buy at 20-25%, but they are also harder to find. It is just not worth it to the average investor. Especially with the economy the way it is. They have to take into consideration holding costs, repairs, maintenance, and the list goes on. In the end they are also going to want to make a buck or two and make it worth their time.

You know you are sitting right if you can at least sell at least acquire it at 30% below market value or more. In addition, you are going to want to take into consideration your assignment fee. You want to know that the investor is going to still get it at 30% or more below market value with your assignment fee already out of the way.

Let's say the known value of the property is $106,000... This means that you would at least need to purchase the property for $74,200, for a quick cash buyer to want to buy your assignment. In addition, you want to consider taking your assignment off of the top. Let's say you decide to charge $3,000 on your assignment. This means you need to get the property at $71,200 or less.

Remember the lower you can get it the better. The numbers you have stated are not even close, but with the proper negotiation you may be able to sway your seller in to an agreement. You have to know how to sell them on the advantages. If your seller would not even consider it then it's time to move on. Your just wasting his time and yours and there is way to much money to be made to play games.

Best of luck to you!!!

 

Hi REIMillions, I'm finding that rehabbers are looking for absolute steals, and 30% below market value ain't cutting it these days. Of course your market may be different but here (DC metro) and in most other locales I'm familiar with, most rehabbers won't consider anything over 60% LTV minus repairs and assignment fee. However if you're dealing with a FSBO and you're putting up a $10 deposit I guess there's really nothing to lose other than $10. I'm wholesaling REOs and I want them under 50% LTV before my fee.