I have gotten a call from a partially motivated seller. He says he doesn't need to move but says he does want to move out of town quickly. I have yet to do a deal in my young real estate investing career and need some advice.
I talked with him today and plan on seeing the house in person Saturday. It is a 3BR, 1 BA 1150 sq ft in Knoxville, TN. I drove by it, seems in good shape. Comp houses in the area are selling for around $80k-$85k. I asked him what he was looking for out of the house and he said $75k and he owes around 62k.
Biggest problem for me now is I don't have the ability to purchase the house on my own. I possibly have a partner but I'd like to get creative and do this myself.
Of course, I will know more when i meet him Saturday but I'm wondering how to approach him, what possible strategies to use. Thanks for your input in advance.
Are you looking to keep this for yourself or wanting to flip to another end buyer?
Even if you get it for $62k and the value is $85k, that makes for a tight deal and if you have to close on it and buy it the extra cost of taxes, insurance and any private loan fees you might take on make the profit even smaller.
At $62k the home needs to me in move in condition meaning no major renovations, no roof, hvac etc.... otherwise it will surely not make it a deal.
You could try a lease purchase option if all else fails.
I read on BP they will ask for a price range. So "75k great sir, and what would be your low range?" Wait for an answer...don't say a word. This next answer is the make or break part. But if Curt says its got to be move in ready at 60ish, keep that in mind. Still good for a practice run.
You could try the lease option or subject to, but just make sure you really have a clear picture of what you are doing with the house, and what your exit strategy is. If you don't have any, or much cash ... I would be even more careful.
Consider working hard to find partners who can 1. look at deals with you 2. help fund them ...
I have found the best relationships I have with private money lenders are when I come to the table with both a solid deal under control, and the ability to have some "skin in the game" ...
I'm with curt on this one. There just isn't enough margin with the numbers you've laid out.
If your goal is a buy and hold AND it is in move in condition, then it might make sense at what he owes or a couple thousand over that, if he needs money for the move.
You could consider a Subject To deal and use his existing finance, regardless what your exit strategy is.
Also, I don't know that I've ever met someone who wants to get put of town quickly that didn't have some serious motivation. Listen to Show 77 with Mike Quarles for some amazing negotiation tactics, before you go meet with the seller.
Thanks for the advice everyone. I will have to see the inside condition to see about either flipping it to another buyer or doing a subject to, I know the margin is very little. I'll listen to show 77 again to help with my approach.
Haha, some of my best deals are from people that say they aren't that motivated, but are. I flat out tell them on the phone I don't collect houses, that I'm buying it to resell it and that I need to be able to justify my time and investment.
It's good to go see a few and get a feel for things when you're starting out, but you'll waste a lot of time going to look at properties that don't make a lot of sense if you jump in your car on every lead. You should have your exit and numbers in mind and a contract in hand when you go look at it. I tell my sellers they need to have everybody on the deed there and that I make an offer on every house I look at (I do).
I don't see much opportunity here. If its in good shape and he'll leave the loan in place, there's value there for buy and hold guys. Not sure Id want to let someone else make pays on a sub2 I set up.
At $85k ARV, you need to buy it at $60k less repairs for a flip, and buy under that for a wholesale.
The only play I see is to find a buy and hold guy to buy it at $75kish and put it under contract at $70ish and keep the spread. Call some of the guys in your area and see what their buying criteria is and if they are looking to buy.
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