Seller from my direct mail campaign called in and wants me to help fix up her house to sell for top dollar. Her house is worth 230-240 fixed up. I have not seen inside house yet but I am guessing it will need about 20k in updates. Paint, carpet, new bathroom, kitchen updates, fixtures, etc. She owes 60k.
She said "how about you buy it from me as is, you invest your time (possibly $) into fix up, and then we split the difference."
Anyway, how do I make this deal work BP? Should I just tell her that I will charge a flat fee to get everything fixed up and then sell through one of my realtors? That's assuming we use a line of credit on her house to do the renovations. Thanks!
First off, make sure you get everything in writing.
Secondly, there's no need for you to actually buy the property from her to partner together. I would simply suggest that you form a joint venture partnership for the renovation and sale of the property. In the agreement you would lay out the details of the partnership where she would utilize a HELOC for renovation funds, you would perform the renovation, and at the end of the day, the proceeds after the sale would be split 50/50 or however you arrange it to be.
Split the difference of what..... the 230k and the 60k she owes? If I'm looking at this correctly - if you sell for 230k put 20k into it - you would split the difference of 210k and 60k - leaving you with 75k each. If you run the 70% rule on the 230k less 20k for repairs, she would net an additional 6k and could walk today without having to worry about who you are and whether you are going to perform or not.
I would be a little alarmed if a seller proposed that to me - concerned there is an ulterior motive. As @Matt Motil said, get everything in writing. I think it gets hard when you lead the project and she argues over the tile color, etc. Even if it's all in writing, tensions can get high when it's someones home. Sometimes it's just not worth the aggravation.
If you do pursue it, I would have a title search done so you aren't wasting your time if there is a ghost in the closet.
Yeah that's a terrible idea....
Personally I think if I buy it from her "as/is" then I am buying it "as/is" and I am picking up all of the risk/reward for the project. If she is maintaining it and she wants me to "project manage" it, then she is the owner and I am the consultant/contractor and she would pay for that service. If she wants to have me buy it and then she invests in the flip (money/time) that is fine as well and she can have a percentage (most likely on money IE 12% loan return with a point). However me buying as is, then putting all my time and money into it and then splitting the profits with someone who I already cashed out of the deal, doesn't appeal to me personally.
Your Mileage May Very though and good luck in whatever you decide
thanks for the responses everybody. I believe buying it as is meant buying at an as is price. Clearly not for what she owes. I would think the as is retail price might be 175-190k.
I appreciate your comments @Matt Motil about just joint venturing instead of buying it and having all of the details in writing. And thanks @Chris Uhler for the comment about tensions getting high over design decisions. That is absolutely true.
I am headed to this initial meeting in an hour so all of these replies help a lot! The power of bigger pockets... Thank you all
thank you @Mike Cumbie
@Charlie John were you able to successfully negotiate anything with this seller?