I am working on a lead, the seller is actually shopping for offers. (he said he
received multiple offers, there are other investors bidding
on the property)
Here comes the number
ARV ~ $620k
repair cost ~ $80k (that's a bit over estimate, I think it is closer to $65k - $70k)
I am offering $393k
My offer is definitely more than the 70% off, minus repair,
however, I think there is still $100k profit to be made.
After I sent the offer, the seller called and
asked me to reconsider my offer.
I told him I don't want to waste time and asked how much
he wants, he said $440k. He told me that both me and the other investor's offer are below that.
I know that no investor will pay him $440k (well, maybe someone will)
My question is what next?
My plan is just to wait for a few days and call him back
and maybe I add another $3k to $5k to the offer.
what do you think it sells for as is on the MLS?
what do you think you could sell this deal to a high volume rehabber for?
I would tell the seller to give you a call before he makes any final decisions. It seems like you should be able to raise your price and maybe meet him in the middle and still make money on this deal even if you use a different exit strategy. In my market a deal like that could be wholesaled to a high volume rehabber for 475k.
In a hot market you cannot afford to not know your repair and ARV numbers EXACTLY and you are learning why.
It is now RARE for me to be buying a house where there are not multiple offers on. MLS, off market, wholesalers you name it and I will have competition.
So with that said, If you are confident your repairs are $65k and the ARV is $620k, and you are comfortable with a $100k spread, bid appropriately.
Using all of my soft costs, I think i could out bid you on that house. (but not pay $440k) Just assume your competition can rehab it cheaper, and has lower holding costs than you. Don't get greedy!
The numbers don't work using my formula either. The reason is that the rehab cost is low compared to the ARV. For instance, my last rehab cost me twice the purchase price of the house. Of course, the numbers worked very well there.
You have a house where the rehab can be done very quickly and then it will be on the market. You can't expect to make the profit that you would on a house needing more fixing.
You need to determine what is the most you will pay before you walk. I would probably put in a bid rather than have him call me.
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