First distressed BRRRR property offer???

[Jacqueline Coombs]

Hi, everyone! I recently went to view a house in an up-and-coming neighborhood here in GR, MI. I am trying to determine a fair price to settle with the seller on. I gave her my conservative offer of 25k and she came back at 33k so we're not too far off. The seller answered my first batch of direct mail to tax-delinquent owners and wants to "move on and start fresh" from her childhood home she just inherited from her mother. Here are the stats on the home: Goal is BRRRR strategy 1910 American four square w original siding/woodwork 3/1 1200sq ft Repairs to rent out: 35k (house has had nothing done to it for 30 years except for an added garage) ARV approximately 70-90k (recently sold homes are all over the place but nicer ones are in this range) Distressed comps are anywhere from 15-40k Owes 2500 taxes due end of March MLS listed properties are seeing multiple offers no matter the condition! Seller and I have established excellent rapport. She was crying on the phone talking about her mother's passing and the attachment she's had with the home. I told her it was okay if she didn't want to make a decision yet and to call me if and when she was ready. She called me back a week later. Seller received another offer of 36k from another person's direct mailer but she told me flat-out she did not like the guy and prefers to sell to me. I have a meeting scheduled with her next Tuesday to sign a PA but the only issue is price! My #s say don't go over 30k but that can be accomplished if the taxes come out of her end. Or, do I try to negotiate closer to my target 25k? I get uncomfortable negotiating price!! Any help on this would be greatly appreciated!! Jackie Botham, GR, MI

[Ryan Dossey]

@Jacqueline Coombs You need to pin down your ARV better. If the ARV is only 70k and you're trying to BRRRR if your bank will let you pull out 75% they'll only let you pull out 52.5k.

Even IF your rehab stays perfectly on budget (if you haven't done a ton they typically don't) you'd still be "losing" about 10k of your liquidity on this house. (Accounting for closings costs/lending fees)

If the ARV truly is 90k than this would work even if you had to come up a bit.

The deciding factor on ARV is most likely going to be the quality of the rehab and what that 35k is getting done for you.