Is this a deal?

Question

Hello,

I am new, but learning a lot, and my last post was just like this one - seeking opinions on a possible deal.

In my area I found an REO on the MLS for $70K, while other houses that are comparable on paper are listed for nearly $100K and selling.  This house needs TLC, but the ARV is probably $80-90K, right? (if similar houses are selling listed at $100)

Obviously I have no idea what kind of work needs to be done on this place.  Should I call the realtor and get a showing?  Drive by and peek in the windows?

If this is a deal, I will not be surprised if it slips out from under me b/c I waited too long.  I want to wholesale the property, but at this time I don't have a buyers list, so I would have to make one fast.

How should I find out what repairs are needed?

Thanks!!

Ben

N/A N/A · Answer

No apology necessary, and I guarantee I will ask more questions!

Tom C · Answer

Ben,

Is this going to be a cash deal or are you using hard money. Those finance charges will eat your profit, unless you are doing a cash deal. Also with being such a tight deal, I am assuming you will be doing your own work? Not much room to play here. You didn't say if you have been in the house yet and if you did and its a REO, the power was not on, right? Are you also adjusting your rehab expense for things like the furnace, water heater and broken or missing water pipes, perhaps a gas leak in the basement or worse in the front yard. These are things that you will encounter as you bring the home back to life by turning on the utilities and should pad your expenses for them.

Since there are so many for sale, as you know you will have to be prepaired for your holding cost or major discount cost. Either of the 2 will also eat a lot of your profit.

N/A N/A · Answer

As promised, here are more questions. :)  Didn't take me long!

I researched this neighborhood some more and it is full of REOs being flipped.  There are 10 homes for sale at $70K or less right now, plus another 5 under contract at 60K or less.  The neighborhood has 40 homes for sale at 100K+.  Half are flips, half are owned, and 4 or 5 are under contract right now.

I guess that there's no wholesaling to be had here, because this neighborhood is already a feeding ground for REIs.

For flipping, though, it seems to be a real winner.  Estimating a $65K purchase price with $95K ARV, after $10K of xactn cost, there's $20K of room to move in there for repairs and profit, and plenty of homes to pick from.

What would you do?  I have to think about it...

N/A N/A · Answer

No worries, I can take it!

I definitely appreciate this resource because as you said it is definitely cheaper than making mistakes in the field.

Ben

Account Closed · Answer

Ben,

Learning is cool with the group.

Asking questions here is cheaper than finding out the hard way in the field. Some things are as obvious as they sound and other things are not. Hard to say some of the time until you have more practice.

Though we might be blunt we are all for people asking questions.

Good hunting... :shoot:

John Corey

Tom C · Answer

Ben,

I wasn't trying to be blunt and if you took it that way then I am sorry, there is nothing here to analyze until get inside the house and know what you are trying to wholesale. When you do, come back and let us know more details.

Please ask as many questions as you like. I sure do.

Account Closed · Answer

Ben,

You earn your money by getting the right deal in front of the right person. That means knowing what other investors are interested in and being able to inspect a property. They will decide for themselves what really needs to be done. You need to estimate it so you can understand if the deal is worth your time.

So, the simple answer when trying to figure out the work that is needed is to inspect the property.

Over time you will come to realize projects that are not worth considering and projects that make sense. You have to check a lot of places to develop that skill.

John Corey

Tom C · Answer

Ben,

Until go and look at the house you have no idea if it's a deal or not. As far as you know the inside could be gutted. If the bank is asking 70K and you are thinking due to comps that it could ARV = 80 or 90K, I don't see a deal. With a REO, they are going to require money down, 500 to 1K. As far as wholesale, I am not sure how you do that if you don't have a buyers list and you're dealing with a bank.

Until you contact the agent and go look inside you have no idea what it is. If you spot a house that you think is a good deal, you need to pick up the phone and get inside the house quickly.

N/A N/A · Answer

Thanks, for pointing out some of the obvious things I did not think of or make clear.  I am working on finding out more about the property.

Obviously I am not ready to jump on this, but I am still learning and this deal analysis is part of it for me.

Thanks again,

Ben