Getting creative with a potential off market flip
Hi Everyone,
I am looking to purchase a single family, in Chandler, AZ, and have been out bid a couple of times already. The MLS drops a new address and it's under contract within 24 hours. So I am trying to be creative to avoid over paying for a property. My plan is own for 1-2 years and rent out and buy again. Full disclosure this idea was sparked from reading forums here and Bigger Pocket podcasts. I am a newbie, so may be missing important pieces. Open honest feedback and reality checks are welcome!
Here's the proposal- I have a friend/acquaintance who flips homes. I'm thinking of pitching him a guaranteed buyer (me) and a profit for him. I believe these numbers are close. (again I am open for...that's illegal, can't do that, or dang go get it, girl)
Possible (Hypothetical) Option
$300,000 ARV
Purchase price of home $160,000
Reno/Repairs 50,000
Single Agent Fees 9,000
Carry Costs 2,000
Total Investment (Friend) $221,000
I buy for $300,000 his profit 26% return $79,000
We write a contract up that states the agreed upon purchase price and timeline and friend sells it to me off market.
No bidding wars, no GC headaches, turnkey home for me
No unexpected carry costs, marketing, a single agent only fees for friend
I did read that friend can't sell it to me for less than 25% market value which leaves me a potential immediate equity but could be discouraging for him since he could potentially make more from this project. I appreciate you reading my proposal and looking forward to your feedback!