700K wholesale deal?

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700K wholesale deal?

Jerryll Noorden
Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes

Hi everyone.

What do you all think about expensive houses wholesale deals?

Let's say you get a 1M house under contract for about 700K

Are there cash buyers out there that pay 700K in cash? Is this realistic? 

Thank you as always.

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Dell Schlabach
Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
10y

It's a dangerous place to play without a LOT of experience in that market, sometimes there is not much difference between 1,000,000 house and 700,000 house.

We have a lot of experience in the 150,000-400,000 range ...over 100 rehabs, but 500-million is a different animal in our area. 

Helped an affiliate buy one recently, looked like 1,000,000 house, sold for more than that 10 years ago. House next door was listed at 1.1.5m, a few similar had sold in development for 750k-1.25m

Realtor assured us it wouldn't sell for less then 750,000, worst case. Bought it for 450,000 , rehabbed and sold it nine month later for 675,000 lost over 70k.

It is not impossible but not probable without a lot of experience in the game at that level. 

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  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    10y

    It's a dangerous place to play without a LOT of experience in that market, sometimes there is not much difference between 1,000,000 house and 700,000 house.

    We have a lot of experience in the 150,000-400,000 range ...over 100 rehabs, but 500-million is a different animal in our area. 

    Helped an affiliate buy one recently, looked like 1,000,000 house, sold for more than that 10 years ago. House next door was listed at 1.1.5m, a few similar had sold in development for 750k-1.25m

    Realtor assured us it wouldn't sell for less then 750,000, worst case. Bought it for 450,000 , rehabbed and sold it nine month later for 675,000 lost over 70k.

    It is not impossible but not probable without a lot of experience in the game at that level. 

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Dell Schlabach EXCELLENT POST the higher end in any market is very subjective to the thin buyer pool... not uncommon for high end homes to sell for 50% of ARV.

    its one reason banks require so much down on high end homes

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  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Dell Schlabach EXCELLENT POST the higher end in any market is very subjective to the thin buyer pool... not uncommon for high end homes to sell for 50% of ARV.

    its one reason banks require so much down on high end home

    Very different world, you look at DOM, and we are used to seeing 30-90,  these houses are 180-600.

    In our regular market price drops are typically5-10k maxat a time, this higher end market 25-50k is typical, and up to 100k at a time not unusual. 

    Wowza, things can go wrong fast, if you were expe ting to make 75-100k and you go over budget, and or hold for an extra six month, or sell for 50-100k less can quickly become a bad day in the rehab world

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Dell Schlabach  I get approached with these types almost weekly and I take the time to step the rehabber or newbie through them and splain to them why 200k in gross equity can become a 100k loss in a heart beat.. we are on the same page

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  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    That is what I was afraid of.

    Seller thinks home is worth 800K, but my comps show it is worth over 1M.

    First thought was "wow good opportunity". But then  who is going to afford to buy such a house in cash.

    This not to mention all the other things you all said. So I am very conflicted. Now.. what do I do...

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Jerryll Noorden  I know there is high dollar RE in Connecticut.. if the median price is 800 to a million like SF bay area or parts of LA or better parts of Chicago then it could be just fine.

    if this is 1 mil and the median in the area is 350k then that's were you need to be very careful

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  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    10y
    Originally posted by @Jerryll Noorden:

    That is what I was afraid of.

    Seller thinks home is worth 800K, but my comps show it is worth over 1M.

    First thought was "wow good opportunity". But then  who is going to afford to buy such a house in cash.

    This not to mention all the other things you all said. So I am very conflicted. Now.. what do I do...

     @Jay Hinrich can afford to pay cash. Finding cash buyers is not the real problem. The problem is, how does the cash buyer make money on a skinny deal like that?  Get it for 400,000 maybe it's a deal for a cash buyer. 

    0Reply
  • Bill Hamilton
    Denver, CO · Member since 2015 · 251 posts · 123 votes
    10y

    While I mostly agree with @Jay Hinrichs and @Dell Schlabach, in looking at the FHA and Fannie loan limits for Fairfield county in Connecticut (assuming the property is where the poster is located), those loan limits of approx $601k might indicate that this property is not

    necessarily a big time luxury priced home. Given that LA and San Jose are only at $625k, I would wonder if this house is not really a luxury or upper end home for the area. I certainly don't know the area well enough to make that determination but it might be worth researching further. 

    1Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    Where the house is located it is a "normal" home. They all look like mansions to me, but that is really "normal" here. When I say mansions I do not mean Lux really.. I just mean they are big. All/most houses are like that here...

    I have no idea how low I can get the house... as the owner already talked about "it is a 800K house"... and as this is not a pre foreclosure list I still have a hard time determining how motivated they are. I know there are motivated.. I just do not know how much.

    I think I will at least meet them and do the scheduled walkthrough and will try to make a really low offer. If it is ok with you all I can report the  updates here and see what you all have to say..

    Sucks I always get these friggin iffy deals. Why can't one just be normal and good! (@&@^

    1Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Dell Schlabach:
    Originally posted by @Jerryll Noorden:

    That is what I was afraid of.

    Seller thinks home is worth 800K, but my comps show it is worth over 1M.

    First thought was "wow good opportunity". But then  who is going to afford to buy such a house in cash.

    This not to mention all the other things you all said. So I am very conflicted. Now.. what do I do...

     @Jay Hinrich can afford to pay cash. Finding cash buyers is not the real problem. The problem is, how does the cash buyer make money on a skinny deal like that?  Get it for 400,000 maybe it's a deal for a cash buyer. 

     Why do you say skinny deal? Just curious.

    If the house is really ARV'ed at 1M and there is not much to repair (from what I can see from here), and I get it for 700K is it really a skinny deal?

    Or do you mean to say if the selling price fluctuated that much that is sells only for 50%?

    If you mean that, then yes I understand.

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  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
    10y
    That is a dangerous place to play unless you are in a very sought after neighborhood with low inventory and high demand. It is also very expensive to rehab a large house in that price range where your finish level and workmanship need to be exceptional. That buyer pool is very unforgiving if you try to cut corners.
    1Reply
  • Assaf Furman
    Wholesaler · Campbell, CA · Member since 2014 · 187 posts · 70 votes
    10y
    Originally posted by @Jerryll Noorden:
    Originally posted by @Dell Schlabach:
    Originally posted by @Jerryll Noorden:

    That is what I was afraid of.

    Seller thinks home is worth 800K, but my comps show it is worth over 1M.

    First thought was "wow good opportunity". But then  who is going to afford to buy such a house in cash.

    This not to mention all the other things you all said. So I am very conflicted. Now.. what do I do...

     @Jay Hinrich can afford to pay cash. Finding cash buyers is not the real problem. The problem is, how does the cash buyer make money on a skinny deal like that?  Get it for 400,000 maybe it's a deal for a cash buyer. 

     Why do you say skinny deal? Just curious.

    If the house is really ARV'ed at 1M and there is not much to repair (from what I can see from here), and I get it for 700K is it really a skinny deal?

    Or do you mean to say if the selling price fluctuated that much that is sells only for 50%?

    If you mean that, then yes I understand.

     Do you know agents in the area that recently sold similar houses? If so reach out to them to ask if they received cash offers that weren't accepted - these are your potential buyers. Since you said there aren't many repairs than these folks can buy that house. Just a thought

    1Reply
  • Daniel Raposo
    Rental Property Investor · Norwalk, CT · Member since 2013 · 276 posts · 147 votes
    10y
    Jerryll Noorden I'm assuming the house is in Wilton where you've been farming, so your numbers are not unreasonable. However, the Wilton Market is slow, especially in the $1M + price points, so houses need to be priced really well to move quickly. The other aspect of this is if the house is already in good shape, why wouldn't the owner just sell it through MLS. If they put it up on there with a 20% markdown it will be a feeding frenzy... Let's grab coffee again and we can discuss it if you want. If your numbers are right, I would be more than happy to put some money together to do this, if the numbers make sense.
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Bill Hamilton  that was my point exactly if the median is really high then this might be high priced compared to Kokomo Indiana but it could be just a run of the mill home in that area. Just like buying a 3 and 2 rancher in San Jose for 800k  those are the average prices. and not a lux home.. lux home may start at 2 mil and above.  so it depends on area

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  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y

    @Jerryll Noorden Why do you think it is not skinny and cash affordable? To me, buying a 1M house will be via FHA mostly or any other conventional, cash buyers are out of the picture, even in LA. I put 10% on expenses as long as being within 6 months from purchase. Having a smaller buyer pool than that of LA, rings the bell that it might be 5-7% more when you sell for 12 months, and probably 10-14% more when it's 18 months. Say you sell in 12, thats 17% from your 30% margin, 13% left, that's only 130k from 700/1M, what about your rehab? say 50k? 80k profit? What if.... you get 900k instead of 1m?

    1Reply
  • Alain Perez-Majul
    Investor · Indianapolis, IN · Member since 2015 · 393 posts · 116 votes
    10y

    Yeah, selling a house of that price looks so sexy and enticing, but @Dell Schlabach, you hit the nail right on the head, IMO. People automatically think it's great to list a $1M+ house, assuming it's sell like your average home. But it's not uncommon for them to sit on the market for many months to more then a year because the pool of buyers is so slim, simply because [logically] there's less people that can afford that type of home. Moreover, once you're talking about buyers that can, they're more picky given that they want it almost perfect (in terms of what they're looking for in a house) since they're paying so much for a home. 

    1Reply
  • Ryan Landis
    Residential Real Estate Broker · San Mateo, CA · Member since 2013 · 585 posts · 264 votes
    10y

    @Jay Hinrichs is spot on. It really depends on the area the property is located in. In general, this price point is a fine line to walk across the US. But, in certain markets, it is not uncommon at all to have something like this go for cash - just know the market and how many buyers are really able to buy at that price point.

    0Reply
  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    I hate wholesaling

    1Reply
  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    10y
    Originally posted by @Ryan Landis:

    @Jay Hinrichs is spot on. It really depends on the area the property is located in. In general, this price point is a fine line to walk across the US. But, in certain markets, it is not uncommon at all to have something like this go for cash - just know the market and how many buyers are really able to buy at that price point.

     True the house we sold and took a hit on was a cash buyer, purchased by an executive transferring to Corps.  Cleveland branch.  

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  • Alain Perez-Majul
    Investor · Indianapolis, IN · Member since 2015 · 393 posts · 116 votes
    10y
    Originally posted by @Jerryll Noorden:

    I hate wholesaling

     LOL love the irony of this comment, followed by the "we buy houses" website below it. Hahaha

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Ryan Landis  I got my property radar monthly up date today on the status of CA . Market.. report said market kind of flat because of lack of inventory.

    also said 25% of all homes are still being bought with cash.

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  • Sean OToole
    Investor · Truckee, CA · Member since 2013 · 546 posts · 445 votes
    10y

    Just to emphasize @Jay Hinrichs point, we have lots of customers flipping in the $750k-$2M range in certain areas of CA quite successfully. He's dead on that it really comes down to the particular market you are looking at. If there are lots of sales with relatively short DOM in that price range then it wouldn't be a red flag for me. At the same time, be more careful. If the property is a bit unique, or agents say things like it's worth $1M all day long to the "right" buyer (meaning not most of them), then I'd pass.

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  • Jerryll Noorden
    OP
    Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
    10y

    thanks for all the advice. I am on my way to meet the seller now. I will keep you guys up to date with everything I have. Thank you all very much.

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  • Travis Lloyd
    Real Estate Broker · Fairfield, CT · Member since 2015 · 312 posts · 231 votes
    10y
    Originally posted by @Daniel Raposo:

    Jerryll Noorden

    I'm assuming the house is in Wilton where you've been farming, so your numbers are not unreasonable. However, the Wilton Market is slow, especially in the $1M + price points, so houses need to be priced really well to move quickly. The other aspect of this is if the house is already in good shape, why wouldn't the owner just sell it through MLS. If they put it up on there with a 20% markdown it will be a feeding frenzy...

    Let's grab coffee again and we can discuss it if you want. If your numbers are right, I would be more than happy to put some money together to do this, if the numbers make sense.

     Keep my number handy... you know I'm always down to take a look at these... prefer Westport to Wilton if we're going over $1m...

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    10y
    Originally posted by @Jerryll Noorden:

    I hate wholesaling

     Me too....

    If I were you I would look into becoming an agent. You will be surprised how much better you can do for yourself.

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