An example I think for newbies

2 Replies

Back in December I posed a question about MLS and listing prices on BP. I was looking at a house that was listed at 198k. I thought it would probably sell for about 180k but it would not cash flow at that price. A home owner could have bought it for that price and fixed it before moving in but not an investor. I wanted to make an offer but our marlket is pretty hot and I felt it might be a waste of time. BP members encouraged me to offer the price I needed.

I had recently made contact with a realtor about another property via a text. That property did not work out but I still had her number. I had never met this realtor. I had googled her and knew a little about her. So, I was sittig around one Friday night and as I like to do, I was having beers and "scrolling for dollars "on my smart phone. I texted the realtor, Ashley and I wrote. "I want to offer on this property, will you contact the listing agent and see if they would consider 140k cash, no contingency, 10 day right to inspect, close in 20 days. I got a text back that the listing agent said put it in writing for my highest price . I texted back 150k nothing more. Ashley put it in writing and in about 8 hours we had a contract. 48k off listed price. I calculated Arv at 220k. My wife and I rehabbed from Dec 23rd to jan 30th. We put 20k into it. It looked great. We had 300 hours into it. I painted the exterior New year day while others were recovering from partying. It was rented by Feb 1st for $1400.00. I will finance out 160k and it will cash flow $300.00 a month. So, sometimes you have to offer. I had researched. I knew she was out of state owner. She had owned it since 1979. It needed work. However, almost the entire deal was done via text and email. My closing was done by email. I met Ashley once during the inspection period. I credit her for taking the chance to low ball the list price for some guy she never met over a text. She and I are now looking for the next deal.

Purchase 150k rehab 20k new appraisal 225k. 

55k equity

So you paid cash for the house and the rehab and now are planning to cash out refinance and pull $160k back out?  Then you'll still have $10k into the property at that point since you paid $150k and put $20k into the rehab that's a total of $170k?  Can you not pull $170k out so you recoup all of your initial investment and you're strictly cash flowing from there?  Also you didn't mention your holding costs up until the time you got it rented.  So even though you have $170k into it and it's worth $225k it's not truly a $55k gain since there are still other costs besides just purchase price and rehab that aren't included.  Unless I misread or misinterpreted?

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