Thanks for helping. I started a marketing campaign this week, I posted details on the campaign in an earlier post.
Through my marketing campaign I uncovered a seller who is slightly motivated. He mentioned he might be heading towards divorce and may need to liquidate some assets.
- 1. The first property he is trying to sell is a 4/2 with an estimated ARV of about 145k, which is what he is asking for the property. The kitchen needs to be updated, but the bathrooms were recently renovated. He rents this property for $1,200/month. I am thinking I can probably get the house for less than his asking.
- 2. The second property he owns is a town-home in homestead, FL. I note that this property is a 3/2 and currently has section eight tenants in the property, rent is $1,000, and the tenants have resided in the property for ten years. This property was built in 2006. He is asking $100,000 for this property. I estimate the ARV for this home to be between $110,000 and $115,000. I note similar town-homes with traditional tenants rent for $1,200 in the area.
- The Third property is next-door to the first, and the details are the same. Section eight tenants, $1,000 rents, same asking and ARV.
- * He owns all of the properties free and clear.
I do not have the cash for a down-payment, but I think I could tap into my network and bring some investors to the table. I have been brainstorming, trying to figure out a way to acquire all of the properties, or at least one of them. Wishful thinking, I know!
I was thinking if I can get the two condos for $150,000 - $160,000, I can borrow half of that from a family member, get a mortgage for the pair of properties, then sell one of the condos at the estimated ARV and repay my family member. I figure if I can get the property at $150,000, I can offer about an 8% return for in six to eight months. This is all assuming the town-homes don't need any work.
I can also scale this plan and try to acquire all three properties.
Does anyone have any other advice? Is my plan even possible? What other options might I have? Have other people been in similar situations?
Sorry for the strange formatting! I tried to get fancy.
Hey @Carlos Diaz . Money can come whether it's traditional financing, a family member or hard money. If the seller has three rentals, I would say that he is probably not super motivated to unload as he is probably familiar with the ARVs. Very minimum you should be purchasing at 90% of ARV - repairs just to really break even for a buy & holds. For flips you would need to minus your profit.
I would get your ducks in a row for each property, present them individually with individual offers, then as a package offer with a discount. If he says no or is way off, then ensure he remembers you and maybe when he is more motivated he will reach out to you.
Hey Carlos, welcome to BP.
You might want to consider J Scott's "flipping formula" for the Maximum Purchase Price (the most you should buy a property for) which is as follows:
MPP = Sales price - Fixed Costs - Desired Profits - Rehab Costs, where
Sales Price equals the conservative estimate of what I can sell the property for (not necessarily the price I’ll list it for!).
Fixed Costs equal all the costs, fees, and commissions that I can expect to pay during the project.
Desired Profit is the minimum amount of money I want to make off the project when it’s complete.
Rehab Costs are the material and labor costs required to rehab the property into resale condition.
"As an example, let’s say that I have a property I’m considering purchasing. I believe I can easily resell it in rehabbed condition for $100,000. Additionally, I know my fixed costs to be about $17,000 , my desired minimum profit is $15,000, and I’ve estimated the rehab costs to be about $18,000.
In this case, my maximum purchase price is:
MPP = $100,000 – $17,000 – $15,000 – $18,000
MPP = $50,000
So, if I can purchase this property for $50K or less, I’ll jump on the deal."
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