Hello! I would love some advice on a potential flip. This would be my first flip although I have two but & holds in the area.
The house is a foreclosure that went on the market 11/2014 for $120k, a month later it dropped to $100k and then in January dropped to $70k. Since then it has gone pending twice and just went back on the market this week. I found out that the home has an issue with the well water. Worst case scenerio is needing a new well for $8k best case is $1k in repairs.
The house is in Ohio where I'm from so I have not yet seen it but have someone looking at it for me on Friday. It looks in good condition from photos, it was remodeling in 2002 though so it needs some updating. Comps in the area run anywhere from $110k-$150k. If I couldn't sell I'm looking at about $1100-1200 month in rent.
My first question would be does this sound like a potentially good deal? I feel like if I could get it around $55k it follows the 70% rule.
My second question is about making offers. I kind of feel like I might as well make a low offer of $50k because what could it really hurt. My agent said I might not want to make too low of an offer and end up in a multiple offer situation rising up the price. Is this just my agent trying to make a higher commission of not wanting to write so many offers?
Would love your thoughts!
My issue is with your agent. I'm not really sure how offering a low ball offer would cause a multiple offer situation if everyone's offer is a blind one.
On the deal, if the comps are there and you can get the property at a deep enough discount to do the necessary work go for it. Just know what your market is looking for in a SFH and tailor the rehab to them.
@Logan Hassinger my agent said that if I put in a low offer and someone else goes to bid the selling agent will just tell them the house is in multiple bids and then the price will go up versus submitting a decent bid that the bank may just accept. I don't really agree with the logic behind it and can't help thinking of Robert Kiyosaki saying he would put bids at 50% of the asking on all the places he looked at.
If I would for sure take the place even without seeing it at $52k where's a good place to start my bidding?
I'm not a flipper but quick approach to get close is to take 70% of the comps minus repairs minus an additional 5-10% for contingency.
@Logan Hassinger I guess my real question is if I want the place for $52k do I start with a bid of $52k or do I start lower for negotiating purposes?!?
I would set 3 prices. The first is your absolute highest price you're willing to pay, the second is where you would like to get it at (52k, strike price), and the third lower than that for negotiating purposes.
You threw me for a moment at first when I saw that you were in MDR and you were talking about home prices in the $100K-range...Then, you mention the house was in Ohio! LOL...sorry, I digress...
I'm from So Cal but flipping here in Missouri. We are having the same issues as you are - RE Agents don't want to submit our bids because they are so low.
I say screw'em! It's YOUR MONEY. Make offers based on what your calculations show is a good offer. I've had several mentors who said, "if you don't blush when making your first offer, you offered TOO MUCH!". It's advice I've taken to heart.
Tell that agent you'll start writing your own offers if he/she is too lazy to do it. A low offer will only draw a bidding war if there is another buyer. Have your money lined up and be the strongest offer.
Remind your agent that you will be rehabbing the property and re-listing it within a certain time frame (we shoot for 30-60 days for most flips), so they have the potential of getting another listing without having to work for it...at a higher price!
I think if you are paying with cash and can close in a short time that could also help your offer if that is a possibility for you.
Also, one tactic I have used in the past to ensure a seller's agent or seller doesn't sit on my offer waiting for other offers so they can have multiple offers and ask for highest and best is to put an expiration on the offer. Something like "seller shall respond by April 28, 2015 at 5PM or offer expires." I have found this works better with private sellers than banks but it is worth a try.
Just some thoughts. Best wishes and good luck!
@John Ching thanks John! I feel the same and would be writing low offers all day if I didn't have to go through an agent!!! I do have to go through an agent right? Or can I submit my own offers and then have an agent handle the deal once accepted? I wish prices in mdr were that low!
@Robb Almy thanks for the tips Robb! It is all cash, close in 30. Should I offer to close faster? I've also heard to do a higher amount of earnest money, have you heard this?
Carrie, you can write offers on your own. There are generic offer forms that your agent should have or I could point you in the right direction.
That's why I said to make sure the agent knows you intend to flip the property - That means you will need a listing agent! BOOM! Double-deal for them! (potentially) That way, the agent will be more agreeable to writing your offers, running sales comps, etc.
Yes, it would be great to find $100K properties in MDR and SO Cal in general, but I don't think the local economy would agree. I'm surprised that Ohio has such generous rents for properties in the sub-$100K range.
Rents here in SW Missouri generally top out at $850-$900 for a 4 bdrm house. : (
Robb posted an important part of making offers as an investor - put an expiration date (I forgot that part!). Very good advice. I don' t believe upping your earnest money is going to make a difference in your offers, but saying you can close in less than 30-days will definitely tell them you are a serious investor. If you do have cash and don't need private money, saying you can close in 14-business days is a good idea.
Still, keep the normal 10-day inspection contingency so you can do your due diligence and have the property thoroughly inspected. That will leave you with an exit strategy to bow out gracefully if the property needs more work than you originally thought,
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