How should I approach this deal?

Question

I come across these listed at my local REI club. I am wondering how to approach this?

Below is a listing at my local REI club. I have access to deals like this but am worried that it might be an attempt top take advantage of new investors. How should I handle this as a new investor? What chronlogical order should these steps be taken in? I am not going to attempt to make this deal but I believe that many newbs here have access to these deals and would like to learn how to handle them.
Thanks.

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	How can I approach this deal?
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Below is a listing at my local REI club. I have access to deals like this but am worried that it might be an attempt top take advantage of new investors. How should I handle this as a new investor? What chronlogical order should these steps be taken in? I am not going to attempt to make this deal but I believe that many newbs here have access to these deals and would like to learn how to handle them.
Thanks.

Quote:
Great property to flip for quick profits! * 3BR/1BA * 1,024 Sq Ft * 2 Story Home COMPS in the area include: * 2120 Lambert St - Sold for 105,000 * 2114 AS Norwood St - Sold for 107,000 * 2063 Snyder St - Sold for $110,000 Estimated Profit Potential - $24,000+ Estimated Rehab cost of $13K assumes new kitchen, bath, carpet, heater & hot water heater and paint. If interested, contact either: xxxx xxxx xxxx
Quote:

Robert Allen · Answer

@ Ryan, WOW !!!!! I learned so much just now..... Here i thought i was getting a deal and I would have taken a bath. Thank you so much and thanks to BP for all this great information and changing my life!!!

N/A N/A · Answer

i recently joined are investment club first night a guy came up to me with are you new? then he told me about a property that he had near me,which i first thought was real cool  my first hour and i've got a deal but after further reveiw. his comps were him just saying you could get x amount all day for this, after repair and i know the area and he was wrong all day, but i got the comps to prove it. like every body said do your homework.

N/A N/A · Answer

Exactly.  What goes around, comes around.

Wes Tuinstra · Answer

Ryan, you are spot on! I think that there is an element
of jealousy going on sometimes, and the fear that the
other guy might be *making money* from his investment
and that the guy he's making it from is me.

Then subconsiously is the thought that if he makes money from
me...I somehow must be losing money.

If the deal is right, I will make money. I not only don't care if he
makes money, I positively welcome it. I want everyone to prosper
in this business.

Ryan Webber · Answer

70% of ARV minus repairs/rehab costs.  ARV=107,000, repairs/rehab costs = 13,000

.70 x 107,000 - 13,000=61,900

Now you have to verify that 107,000 is an accurate ARV and you have to verify that the repairs needed are 13,000.  These two numbers are crucial to the equation and if either are different then it will dramatically change your answer.

I have come across quite a few investors that have a hang up with buying from another investor.  I would advise you not to make decisions based on emotional feelings about a deal or who you are buying it from and make your decisions based on the numbers.  Who cares who is selling it, crunch YOUR numbers and make your decision based on those numbers.

I have made a lot of money buying property from other investors.  And I have sold property to other investors in which they made a lot of money on it.  It didn't matter who was buying or selling it.  It only mattered what the numbers were.

N/A N/A · Answer

They are asking 63k. Are you saying you want to pay 70% including rehab? I figure that this is how first time investors can get started. Is the "whole saleing"?

Frank Adams · Answer

I never trust ANYONE'S numbers except my own, and sometimes not even those. Without knowing anything about the size of the rooms, or whether or not the paint needed includes exterior I doubt that the work can be done for $13K.

I do my own work on most things, I don't do 2 story roofs though and this is one. Even doing my own work I don't think I could do all that for the $13K though.

I'm an experienced investor, close to 30 years and the only time I bought a property from another "investor" he was actually a newbie who started a rehab, got in over his head and I bailed him out, he lost his a** on the deal.

all cash

Ryan Webber · Answer

I personally never let someone else do MY homework.  I can't imagine taking the fluff on an advertisement and believing it.  Who cares what the seller is saying, crunch your own numbers and determine if it's a deal.

Obviously you need to first find out what the asking price is, and then determine if its even in the ballpark.  If comps are coming in at 105K-110K, then I know I need to be at 73-77K WITHOUT any work done to the property to hit my rehab numbers (70% of ARV).  After subtracting possible rehab numbers, I know I need to be in the low 60's.

If they tell me that they are asking 70K or so and act like they have some negotiating room, then I would start doing my own homework.

First, I would check with a realtor and check comps in the area to determine an accurate After Repaired Value.  Are comps actually selling for a $105/square foot?

Is their estimated rehab a contractors bid or is it just their estimate?  Verify that the repairs listed are all that are needed to sell it and that it will only cost 13K.

After determining your own estimates on these two vital numbers, then you can make your own determination of if its a deal or not.

I would recommend buying a rehab project in a normal market at 70% of After Repaired Value minus repairs.