First Offer

[Renard Whitaker]

For the last couple of weeks I've been scouting out a couple of six unit REO's in two different sections of the inner city. Tomorrow I want to submit offers on both of them but after crunching some basic numbers, I'm concerned that my offer will be somewhat offensive to the agent. (He's only getting 2% to start with and my offers are in the $25-$30K range.)

The offers are so low because they both need extensive rehab (approx. $140K each), plumbing, electrical, mechanicals, the works. Once all is done and said, the cash flows ($42K and $25K) look really promising and the cap rates equally so.

My concern is that I'm using Transactional Funding on the purchase and looking to clear a small wholesale fee of about $10 - $15K total so that puts my end buyer right at the 70% rule, give or take a point or two.

Questions: Am I grossly over estimating rehab costs? If I am and my offer is considered ridiculously low,how will this effect my credibility in the sight of the agent and my potential buyers? Any and all feedback is welcome and appreciated. Thanks.