How much should I offer and not be insulting

3 Replies

Sorry this is long, but bear with me.

I have a coworker who recently inherited a 3/1 house (built in 1928) from his in-laws on 1.25 acres in Post Falls, ID. It is in a trust that is being transferred to his wife soon. He has no interest in holding on to the property and sees it as a big headache. I told him I was interested in it as a rental until he told me that it appraised for 194k. There is about 20k left on a mortgage but no other liens. It is currently being rented for around 600, but could probably rent for closer to 1k given its location. Either way, as a rental it doesn't really make sense for me. As a flip, maybe... but he was told that the land could go for as much as 150k. Since the house is such a small percentage of the value, does it make sense pursuing as a flip?

A few details: 80’ wide lot, newer furnace, metal roof, collapsed out-building on the property that needs to be removed, needs electrical panel replaced (which I can do, assuming local code allows me to), needs siding or paint. It’s kind of just ugly and needs some TLC. Also, it is currently being surveyed to see if the neighbor’s fence is where it should be.

I think there is opportunity to make this deal a win-win for the both of us. I have about 35k to use right now, so my current thought on how to structure it is to put down 20k (enough to pay the mortgage off) then ask him to hold a note (with DOT) for the purchase price less down payment. 10-15k should give me enough to make necessary repairs, some cosmetic upgrades, and clean up the place for curb appeal. I could make monthly payments, with a balloon at 2-3 years. Then pay him off when I sell, hopefully within a matter of months.

What questions can I ask or information can I gather to help analyze ARV and end up at a decent offer price? I am working with a Spokane realtor to pull comps, but I don't know that that is sufficient to work backwards to an offer price. I know about the 70% rule and how that works. Anyone in the Post Falls or Coeur D' Alene (CDA) area that can help determine ARV?

@Bret Emry Some of things to consider 

- To get a realtor who has sold property in that zip code the last 6 months would be an ideal person to pull comps for you. If there are no comps in the last 6 months then you know, you would have to hold atleast six months and plan your cash reserves accordingly.

- You will always offer what you are comfortable with supported by facts, analysis and numbers instead of fearing  you would embarrass a friend or a colleague. Always offer 70 arv and back it up with analysis.

- Again you would have to send in a professional contractor to determine exact rehab amount.

- Other option is to find a rent to own situation and take a wholesale fee and manage the property for a fee, this way your friend doesnt need to manage it and you make some money.

Without knowing too much about your experience, I feel unless you have CMAs in the last 3-6 months, it may not make sense for a flip. Again, I could be wrong.

Hope this helps.

Man I HATE appraised value as often it is stupid high, or stupid low. I would tell him if he wants a quick cash offer you can do it but you have to make money on it. If he would rather list with a realtor, wait months, get an offer with repair contingencies, and have to fix stuff.... Feel free. Often they can get more money on MLS then what it makes sense for you or I to pay. However! How long does he want to wait?

Personally I don't think that I would ask for a loan from him as that can get sticky/awkward. ESPECIALLY if you over pay.

hey Brett,

I'm an agent over here in cda. I'd be happy to pull some comps for you and help you come up with a good ARV.

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