Hey bp need some help,
I got a 3/2 built in 1958 with 1523 sq ft single family brick house with no basement or garage, electric heating and ac needs work. Heres my situation and numbers:
The house was listed at 100,000 with a realtor and expired at 88,900. They called me off a direct mail letter I've been sending them and I offered them 65,000 and this is what they sent back through email. Remember this is as far as I've gotten with a deal as to having them being this close to agreeing on a price so tell me what y'all think. This is the email:
Thanks for giving me a couple of days to ponder your offer. Let me offer a few details before I respond. Since this was my mom's house and she has passed away, we are in the process of working through her estate according to her will. She appointed me as executor. In total there are 4 heirs involved in her house and property. My goal has always been to get as close as possible to 20K each for the heirs after all is said and done. Now, I know that desire does not equal value and there is also no market value for sentimental attachment, but in working with a realtor before, I did not think that to be an unreasonable goal. (As you probably know from your research, we have dropped the price a few times already.) We also still have some final expenses that will come out of whatever we get for the house. So, I want to do the best we can for all involved while still being reasonable.
Now, I also know that this is your business and you need to make a profit, so I do not want to be unrealistic in my estimates or desires. And I realize that you will have to spend some money on the house before you can sell it at a profit. It surely does need some updating! I also spent some time backing out what we would spend in realtor commissions and closing costs.
With all that said, I would like to present to you a counter offer on the house of $75,000. For that price you could have all the furniture and appliances that are still in the house. With Baxter coming in and the house being near that bypass, I think this would be a fair price and should allow you to update the house and still make a good profit on it.
I really appreciate your interest in the house. Please get back with me and let me know what you think about this counter offer. I look forward to hearing from you.
Without knowing many details I can say that 75k is only 15% off the price that expired...with no offers then I can't see them expecting 75k in a realistic world. Regardless you need to find out the ARV and ask if you can get in the property to do a real assessment of repair costs.
1950's house can have some major surprises that can't be seen...don't short change yourself...give this guy an accurate assessment of the property and what it would take for you to inherit the risk for him.
We're all going to need some more info to figure this out. For starters:
- 1. What is your goal with this property? (wholesale, flip, buy-and-hold, etc.)
- 2. What is the ARV? (or at least the comps in the area, we need something to compare)
Hey guys thanks for responding! The ARV is right at 100k fixed up. Off of what he told me I think it should take at least 15k and then like Joshua Springer said with it being that old I was thinking it could be up to 20-30k. I'm going tomorrow to do an inspection on the property to see exactly how bad it is. I just like to pull quick comps and shoot numbers back and forth to see if we're in the same ball field. I think I'm just getting to excited! Thanks guys
I think you simply respond with the facts. That email from the seller is very emotionally driven and filled with lots of assumptions as to what profit you will make. Give them factual numbers from your side and fair explanations as to why you have your numbers - they obviously understand you need to make a profit - and if you set your parameters concretely they will understand. They may not agree and will walk, but then you can find your next deal.
Steven J., Will See Real Estate | 240‑394‑5733 | http://WillSeeRealEstate.com
Don't get blind sided from your 1st deal, I was eager to get started in real estate and when I got my 1st deal my emotional high took over. I got lucky and barely broke even, my advice to you is to stick with the number. Great job on asking other investors for their opinion, wish I did the same.
Will Porter made a great comment, what is your goal of the property?
This is my quick analysis when I do a quick analysis on flips (numbers varies in different area, so please adjust accordingly)
Holding Cost: 3-5k
Closing Cost (1% of ARV) & Realtor Fee(4%) if you list it: 5k
Max Offer: 65k
Based on the facts of this thread, and my personal calculation you should stick with 65k. This can vary based on your strategy.
Best of Luck
you didn't mention what the property is for? It can't be for a flip right? if you said ARV is 100k, it's an old house (aka surprises), and you estimate up to 30k? so if you get it for 65, and assuming you hit your upper limit at 30k for rehab...Is this a high rent area and this is for hold? so you can rent for like 2k-ish/month?
@Josh Adamo Is the house sitting empty? What are you looking to do with the house? Have you looked at the house yet? 65K might be to high.
If nothing else I would defiantly say in touch with them, they might come around as time goes by and you will be there.
I'm a new investor like yourself, but from what you have said unless you find some comps that lead you to believe your ARV is significantly higher then I would think that even 65k might be a bit high. Now if your ARV were closer to the 115k area then I would think 65-70 k might make more sense depending of course on you inspection.
Whatever happens with it, good luck on it and do t get too eager for that first deal to make a bad deal.
Give us details on the A/C and electrical work required. Those items eat up Benjamins fast.
A 1950s electrical system could be a 60 amp, fuse box, two-wire setup - completely inadequate for today's needs. Definitely get a handle on what you've got on your hands.
HVAC's a wildcard.
Roof, windows, and drain piping are worth looking into.
Multiple heirs can be difficult - too many conflicting interests and everybody already has plans for their slice, making price drops difficult to achieve.
Stay at 65 or less. Don't be like me and countless others who have forced a "deal" just to get one done. There's better out there for something with a ceiling of 100K.
Not impossible, but seems odd that it was initially listed needing repairs at the ARV? How long was it listed for? From their email reply it seems like they're certainly overvaluing the property. It seems you over offered from the get go if it needs a fair amount of work and is only worth $100. I think you need to firm up the ARV and if it's really $100, do a walk through and get a better idea if what's needed tomorrow and reevaluate.
I'm pretty new as well but, generally speaking, just as a quick, high level analysis, you want to have invested around 70% ARV, after repairs. So if ARV is 100k, you need to be buying this property at closer to the $50k price range, if you anticipate $20k in rehab.
I do one flip a month and I would offer 55 to 60 tops...repairs on older houses can mean higher costs in parts and labor I can tell you that your misc. budget should be at least 10 to 15 percent of your overall budget it will depend on the type of repairs.
I know you are excited about your first deal but stick to your numbers.
Man just wanna say thanks for all the replies. I would like to wholesale this deal but I did tell the client that I was on the higher end of my budget and that I doubt I could come up much if at all. I actually told him that due upon further inspection I might have over priced but I will go out today and do a good walk through. The ARV could be closer to 110-115 fixed up right but I like being conservative on my ARV. I think my numbers sound a lot tighter bc I have been noticing that my old offers that I've submitted have been selling at 20-30k over my offers and am trying to adjust a little.
I think this could be a great rental and possibly a decent flip. Once again thanks for all the help guys!!
Don't know how to tag name, but your are welcome Josh Adamo!
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!