Turnkey Property???

Question

I received an email from an investor that has a home in my area that he has rehabbed and it is ready to go.  The ARV is 130,000.00 and he's asking for 105,000 (what's owned on it).  He's just ready to get out of the loan at this point and wants to know if I would be able to find a buyer that I could "wholesale" it to, but it just doesn't seem like a deal that someone would want.  I'm new to this and could be wrong.......can anyone shed some light on this for me.  It is a 3 BR 2BA, over 2,000 square feet and no repairs.....I don't know if that informaton would matter.  Thanks!

Michael Rossi · Answer

As a rental, it's worth less than $40,000!!!  I'd pass!

Mike

Eddie Ziv · Answer

Mike is right. Forget about rental. The cash is not there (2% rule) but even if you want to tie the house with a L-O-N-G closing date so you can find a retail buyer, here is the problem. The seller who needs cash, wouldn't like to have a 45-60 days closing (He needs the cash) unless you can secure financing yourself. Lets say the seller agrees for the long closing period, then you have to find a retail buyer who is pre-approved for a loan amount (Not pre-qualify - that's easy) and this is hard this days as well. Now, if you can jump all those hurdles and still come up with a profit. My hat is off to you, but it seems to me a lot of variables against you with a relative small profit margin.

Account Closed · Answer

Thanks Justin and Scott.  I will definately do more research and see if the seller is willing to lower the price a little.

Thanks!

Account Closed · Answer

He said that he's having some financial difficulty and needs out of the loan ASAP, but he's firm on his asking price of 105,000.  I had a realtor friend of mine pull up the comps and he determined the ARV is close to 130,000 and rental rates in that area are about 650.00-725.00.

Scott M. · Answer

Well no offense to the realtors here but if you want to determine the value then call an appraiser.  He should invest the $300 or so to get a real appraisal done.

Also "The ARV is $130K" is different then "The ARV is close to $130K".

First - he needs to know and show the real value of the home and then I think Justine is right on - he needs to discount it more.  if it is already rehabbed maybe not that much - but more then 20%.

Scott M. · Answer

How much would it rent for?

Who says the ARV is 130K?

Justin S. · Answer

Warnetta-

What is his/her motivation for selling?  Does he need cash now or can he wait 45-60 days?  If he can wait, tie it up with a option contract then assign the deal to a retail buyer.  If its move-in ready and in decent part of town, you should be able to move it quickly.  If he needs cash now, then I would not offer more than 55-65% of ARV minus repairs.

Talk with seller and see what his/her motivation is and then you can work on the deal from there.  If you can't negotiate on price, you can always negotiate on terms.