Ok, so I found a house I really like in a pretty hot market. House going for about 190k, comps consistently tell me the ARV is 300k to be conservative, but closer to 350k. I haven't done a walk through with a contractor, but my guesstimate is about 45k in renovations/repairs. So I'm feeling pretty good about the numbers.
Question is, what do I do next? Do I contract the house if I'm going to flip it myself, then go to the lenders? Or do I go to the lenders, then to title company? There is a listing agent involved. We are meeting Monday, and I want to look competent lol.
Or do I go to the meeting with contracts, contract the house while I look for funding?
I'm really excited and don't want to let this slip past me.
Hey @Matthew Nixon
Welcome to the B/P community. In Colorado, it is customary for the seller to pay their real estate agent and the buyers real estate agent. The premise is the seller gets a bunch of money and can pay both agents. So if it is the same there you can get an experts opinion for free *(you will have closing expenses but the agents time will be free to you).
To be taken seriously by some agents they will want you to have talked to a lender, and get prequalified for a loan. For me, I would be more than willing to sit down with you and walk you though the process before you meet with a lender. So if you know a local agent like that, sit down with them or if you know a lender like that sit with them first. Make sense?
If it was me I would go
1- Real estate agent
4- the agent will be able to help you with the title company
One red flag I see is the fact that this is a "hot market". Normally in a hot market you can sell almost anything at a market price unless it is a real turd. So why is this property so much cheaper than everything else. Are the sellers motivated? Do they not know what they have? Are they out of touch with market values? Do they have a huge tax bill to settle? Or is this property in such bad shape that it will take way more than expected to fix it up. Just some food for thought.
It sounds like you have done your research. If this is really a good deal go for it! If not there will always be more that come down the pipeline. Sometimes passing on an okay deal is the best financial decision. Good Luck!!
Thank you for your response sir. So several things have transpired over the last few days. 1, the comps are saying the house is worth at least 350 ARV. I always go with the most conservative numbers. 2. The realtor had a few different contractor bids that she allowed me to have. They were bigger and more extensive than I thought and closer to the tune of 95k. If I add the 20% buffer on the repairs for the things that could go wrong, that jumps up to 114k in repairs and renovations.
The house is a Fannie Mae owned house, which from my limited understanding means it is a REO home and I take it that's why the low price, along with the extensive repair I imagine.
So I have a few thoughts now. I wonder if this is a project too big for me as a beginner. I don't have an LLC, nor do I have a firm understanding of how to protect my personal assets and finances. Nor do I have any of my own money to throw in with a lender.
So there are multiple levels of concern I have now. First lawyer I called won't even have a discussion with me for less than $200 an hour. I feel like I have a general understanding of different types of investing, but what I don't have is capital or experience. Lack of exit strategies and so I worry that if I did get the funding and all went well, but the house didn't sell, what would be the implications on my personal assets and finances.
All feedback is very appreciated.
Yeah there seems to be a bunch going on here. That makes more sense about the price if a bank owns it or it was foreclosed on. I think you are correct about your thought on the damages as well.
20% is a solid buffer. I like that you go with conservative numbers. I do the same and have been surprised with extra money when I am done and not having to cut a check after I fix up a house.
If you are worried about it being to much for your first I would ask around and see if you can get a partner. Maybe work with someone with more experience. There is also wholesaling. Maybe you can sell it to an investor after you lock it up and make$10k or whatever. Either way it will be a good learning experience. (One caution, if it is on the open market, MLS, you probably won't be able to wholesale it because any investor could find this deal)
Yeah I would still be open to working with a vet. So I'll keep my ear to the ground. Maybe they'll give me a good split. I will keep you all posted on that.
Meanwhile I'm going to focus on my short term goals like getting my license and learning my market better.