What should I offer for 3/1.5 SFR?

Question

The property:
1976 Brick 3 BR 1.5 Bath SFR FSBO
Transitional Neighborhood

Comps show ARV approx. 82,000.
Yrly Property taxes 379.00
Repairs 12 - 15,000.00

I would like to be able to wholesale this to an investor at an attractive price.  What should be my best offer to the seller?
Please help.  Thanks

Steve Sparks · Answer

not sure if this will help but I have bought and rehabbed many similar houses (3/1.5 ARV in the 80s..12 to 18K rehab)..My strategy is to be able to sell quickly retail at at least 10% under what my "comps" are telling me. I have no problem finding them in the 23 to 29K range depending on school district. I think if you look harder you may be able to find a better deal. Good Luck!
Steve

Justin S. · Answer

It depends on how you used their data.  If I were you, I would call up your local Fidelity National Title company and ask to speak with their marketing person.  Ask them if they can grant you access to their Fidelity Passport Page.  Once you get access you can pull your own comps and do a little better job of filtering.

You need to be looking at homes with similar bed, bath, square footage, same neighborhood, same construction, similar year built, etc.

Donna S. · Answer

A combination:
Our county tax site will give you comps + eppraisal.com which also gives you cyberhomes & zillow.  I took three from tax site and the average from eppraisal.  82,000 was the middle of the road figure.  
How does that sound?

Justin S. · Answer

Donna-

How did you get your comps?

Donna S. · Answer

Great info and clearly explained so even this silly newb like me can understand. 
I would have no problem taking 3,000. for this deal.  It would be my first one and the experience of making it happen would be worth the 2,000.  I did the repair est based on rehabber hiring a contractor.  I have a potential buyer who is a remodel contractor and may actually be able to do repairs cheaper since he gets better deals on materials and doesn't have to charge himself O&P.  I will call him tomorrow and see if he will buy @ 48,000.  Thanks for the help.  Can I call on you again?

Jon Holdman · Answer

The investor (a rehabber, I assume) needs such a large margin because they want to make money.  If the purchase price plus rehab costs of a fix and flip are 70% of the eventual selling price, the rehabber with gross about 15% of the selling price for a profit.  That's taxable at ordinary income rates, maybe with SET.

Fix and flips make no sense if there's no work to do.  An appraiser on the eventual sale won't accept a new, higher value, even if supported by comps.  I'd put minimum rehab at $5000 even if its just paint, carpet and misc minor repairs.  Could be as high as $15K if more work is needed.  That's puts the max a fix and flipper can pay at about $42-52K.  If you want to take on a few grand for your wholesale fee, the most you can pay is about $38-48K, depending on on the work needed.  If the work needed is minimal, and you're willing to take, say, $3000, then paying $45K might work.

The real answer, though, is what will your buyers pay?  If you have a ready and willing buyer that would pay $55K for this property, then you can pay $45K and net a bigger pay day.

A fix and flipper is looking at maybe $12K profit on this deal if things go well.  If you're looking to extract more than a few grand, you're looking for too much.

Demos Loizides · Answer

Assuming your numbers are good, offer $38,000. I basically took the $82K figure and multiplied it by .65 (which accounts for a 5% ARV fee for you) and I subtracted $15K for repairs. You'll come up with $38.3K, so I rounded down. You may have to use a different multiplier than what I used based on what investors are using in your area.

Donna S. · Answer

Sellers at 45,000 & doesn't want to budge.  Is there anything else I can do to make this work or just look for something else?  Why does the investor need such a large margin?

Justin S. · Answer

What is your county website?  I want to look at it.

Donna S. · Answer

Justin, Thats what I got from my county website and I had to make sure that the properties were either in this same neighborhood or a similar one.  We have lake property in this county and the closer you get to the water the higher the prices.

What should I offer for 3/1.5 SFR?

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