I showed a property to a fairly new investor in town today. Our recommendation is buy for $46k, do $5000 in repairs (our expert, inexpensive contractors, 10 year relationship with them). Firesale $59,000, make $8000 , go on to the next deal. Or, have us find you the qualified owner finance buyer for it, buy and hold.... we specialize in that.
He wants to buy it, and them do repairs himself and owner finance it himself. Here's where he will run into a disaster -
- He's going to overpay on the rehab by at least $5000 using his crew, based upon what he quoted me.
- He's going to owner finance it to someone he knows and do only $2k down.
My partner was horrified when I told him that - he's done thousands of these owner finance deals and that is a sure path to losing money. Got to get 5k down at least in our market, and really be careful on qualifying them, not selling to friends or associates, generally. And do NOT over rehab these houses in this affordable market!
Owner fi is great but make sure you really know what you're doing. I warned this guy to not do what he's contemplating. But if he does, he'll learn the hard way.
In my opinion those firesale numbers like really tight and do not accommodate closing costs, holding costs, concessions,rehab cushion, and possible realtor fees.
People's opinions will vary on that of course. My contact has done several thousand houses here, he knows the numbers, I trust him, he makes me a lot of money. The real issue is what this guy is planning to do on the owner finance side, it's a baaaad idea.
I thought they looked tight too, but I'm not the expert that he is :)
What is the arv?
ARV is 69k. thanks.
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