I recently sent out my first campaign letters. I received my first phone call today. It is a lady who owns a property with a tenant and wants to get rid of of the house. She told me she had a lot going on in her life right now and didn't have time to deal with the house.
The ARV is around 80,000 per zillow and around $65,000 on realtor.com. She threw out $40,000 as a figure but then took it back because she didn't know how much the property is really worth because she bought it as a short sale a few years ago.
I spoke to someone and they told me that I should offer $20,000. This seems low.
All advice welcome as this could be my first deal.
I have not been out to the property she reported to me that it didn't need any updates other than cosmetic, things like granite counter tops. She did not know the age of the roof.
@Auspria Wade How are you determining the ARV of $80K? You can not rely on assessments or zillow. You have to know how to comp houses. Maybe you should partner with an experienced wholesaler.
I did ask the advice of an experienced wholesaler. He is the one who told me to go with the $20,000. I don't have access to the MLS. I am wondering if I can get an accurate way from another source. I know that I should look at square footage, bedrooms, and bathrooms, within a .5mile -1 mile radius.
You must get closer to the real ARV than $65,000 to $80,000 since that represents 100% of your profit. This is the largest number in your calculation of maximum offer price and thus, is the most important.
I look at similar sales on Zillow. I look at the median price per square foot of houses with similar square footage and beds and baths. I very seldom find houses that don't need more than about $5 per square foot in repairs.
@Auspria Wade I agree with everyone here, you do need to get as good of an ARV as you can get. How did the wholesaler you asked come up with $20k as an offer? Maybe they can share there rationale with you. I don't have access to MLS either but I've managed to go to as many REIA, BiggerPocket and other RE networking events as I can and have gotten to know some realtors. I would recommend you work on getting to know realtors so you can either ask them for comps or at least an analysis of the area.
To address your immediate need, here is what I used to do: Visit Zillow, Trulia, Eppraisal, City/Town GIS (to get appraised value) and RealQuest Express. I'd take the values and average them to get my ARV. I will caution you that sometimes you'll find an estimate WAY off at one of the sites (I had 4 sites say a house was around $120k and the 5th side $420k) - just remove that one from your averages.
For the sake of examples, let's use the numbers you have ($65k & $80k). That averages to $72,500. My equation to get my MAO (maximum allowed offer) is 65% of ARV-repairs-my fee=MAO. So even if you just put $5k into repairs and $5k for a fee, you would be at:
$47,125-$5,000-$5,000=$37,125 MAO (start lower for negotiation purposes)
However, I would strongly suggest you go look at the place. If you don't know about estimating repairs (like me) bring someone with you that could help you at the very least point out things to take pictures of so you can get advice later.
I think your wholesaler friend's numbers were pretty good considering you don't know too much about the property. Anyway - just my two cents as a fellow newbie wholesaler.
I've heard many times, if making the offer doesn't embarrass you, you are offering too much.
Thank you so much @Shvonne Craig. I appreciate your response! I am going to visit Realquest express and Eppraisal. I did look at Zillow and Trulia.
I do plan on going to my next real estate investment meeting.
My wholesaler friend said the same thing, if you are not embarrassed by the offer it probably too much. I am still trying to wrap my mind around sellers, selling for low amounts. However, I know that it has to be happening because of the success stories I have heard. I believe I just to have to hang in there.
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