Should I Pass

Question

Selling Price 31K
ARV: 64K
Repairs: ~ 10k

I'm trying to wholesale this. What do you think?

Norm Chrostowski · Answer

I wouldn't pass, I'd just offer 18k and see what happens? Never know the reation you might get. I wouldn't assume.

People view things very differently. Maybe he views you as a relatively new investor, and he's sort of testing you?Maybe he already knows he'd take 18 or 19k for it? Maybe he figured he could start at 31k and hope for 24 or 25? By offering 18, now your not really to far from his number? Again, you never know.

I'm certainly no expert, Ryan Webber and Nick J. will atest to that, but offer something. Don't be surprised if you get a yes.

Norm Chrostowski · Answer

For me, the selling price is too high. 18 or 19k max with that kind of rehab. 10k is a good amount of work. It's not a total gut job, but I can put in a kitchen, bath, flooring, paint, carpet, a few windows and doors for about $4500. I just rehabbed my upper apartment. It's a lot of work, and for 31k, it's too much work to pay that much for a house valued at 64k...IMHO

Buy 18k
rehab 10k
assignment fee 3k
closing 3k
Buyer is 'all-in' for 34k
Buyer pays 53% ARV

At those numbers it a relatively attractive investment.

James Hiddle · Answer

You also have to factor in how much profit does your end buyer want as a minimum. This type of deal would probably scare most rehab investors which is why the profits after all costs and fees are factored in is way way too thin for the rehab investor.
          
          For deals like this 50% would be ideal. Anywhere from $13K-$18K for the sale price would be a safe bet.

Norm Chrostowski · Answer

I'm not in the Houston or Nazareth markets. In my market, and with that kind of rehab, I would like to stay in the 50% range. Buying at 26k puts the investor "all-in" at around  65% ARV. That's a bit too high for me around here. There's not a ton of inventory, but there's enough. Investors are looking for GREAT deals.

I mean, if you buying a 60k house for 42k (70%) to me that doesn't sound like a great deal. BUT, if you buy a 50k house for 25k, that sounds like more of a deal...am I making sense? You kinda have to "sell the sizzle and not the steak", and obviously back it up with numbers. Again, just my opinion

Ricky Ostrom · Answer

Booker;

Myself, being in Houston with you, I don't recommend doing any deals where the ARV is below $100,000.  There is too little of margin.   Houston is full of $100,000 - $300,000 homes in trouble,

RDO

Winniferd B. · Answer

Thanks for the advice!!  I thought I should pass.  It's just cutting it a bit close.

Norm Chrostowski · Answer

SWEET! Another vote.

I concur Jim. If it had a whole lot less rehab, you could consider low 20's

Jon Frame · Answer

For me this is a pretty typical deal that I have been doing for a while now. However, because of the market the ARV has to be pretty solid. If your off just a little it could be a deal breaker.

ARV @ 64k @ 70% = $44,800.
$44,800. - $10k rehab = $ 34,800.00
$34,800 - $3k wholesale fee = $31,800 (your price typically)
Too tight in this market , you should have at least 5k wiggle room for your buyer. Probably should have gotten this for at least $26k and maybe sold it for 29k and that's even if your numbers are solid.

Of course getting it for 18-19k would have been even better.

I just sold a deal similar to this if you would like to check it out as an example. I still have it listed for sale on the forum.

Thanks.....

James Hiddle · Answer

With those #'s the investor you're going to flip to will only have $23K profit that's not including closing and other costs plus your assignment fee which you did not list.
          
          The profit amount is way too thin for my taste.

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