Potential Deal II - Flip To Buyer

Real Estate Deal Analysis & Advice
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Potential Deal II - Flip To Buyer

Dave Gibson
Real Estate Investor · Huntsville, AL · Member since 2010 · 44 posts · 11 votes

Guys,

I'm simply not going to give up locating a good deal for my buyer. I met w/ my buddy (REO agent) last week and he took me to one of his homes. 3BR/2BA (20yr. old home), rancher w/ deck (needs work), two car, decent community, good schools, close knit comm.. Hasn't been listed yet...agent and I are friends, but business is business and he wants to see if I can deliver. The numbers are below. Did I miss anything? Please let me know:

ARV - $120k
PP - $42.5k (also includes DP, CC, Insp., LF, RE Comm., and Appr.)
Repairs - $11k (this includes a 15% markup and addition of SS kitchen appliances – always my recommendation)
HC - $1440 ($480mo x 3[Avg. DOM], Taxes, Insurance, Utilities)
Selling Costs - $9900 (RE Comm., CC, Warranty)
Wholesale Fee - $5k
Total Cost - $69,840k
Sell below market @ $110k
Potential Profit - [b]$40,160
[/b]

63% ARV

Keep in mind that I can save him some commission cost due to me being an agent.

P.S. Spent most of this morning putting up more bandits signs and speaking w/ folks that are still responding to my rent-to-own signs that I put up a couple of weeks ago.

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
16y

If those numbers are accurate, sounds like a great deal. A few things to keep in mind:

- Make sure the ARV is accurate. Don't take anyone's word for it...verify the comps yourself

- Why do include a wholesale fee in there if you're selling to an end-buyer?

- Are you confident in the rehab costs? 20 years is the typical life span for roofs and mechanicals, so if the house is 20 years old, you may need to replace those, which could add $7-10K to your rehab costs. If you don't replace these, keep in mind that the inspector may flag these things.

- You assume three months of holding costs. Remember that if you plan to sell to a first time homebuyer, they will likely be going with an FHA loan...selling in less than 90 days FHA can be a challenge. I like to assume at least 5 months of holding costs, though my average DOM is 102 days...so if I save on holding costs, that's a bonus.

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  • Dave Gibson
    OP
    Real Estate Investor · Huntsville, AL · Member since 2010 · 44 posts · 11 votes
    16y

    Thanks, Luis and Champak....Champak, to answer your question regarding why my father-in-law and I don't team up and buy outright ourselves...we are unable to at this moment to do that. I would love to, but from a financial and credit standpoint, we're unable to....that will change over time, though, as I'm in the process of cleaning up my credit now.

    Melvin, this is an REO flip that I'm hoping will be wrapped up soon. What part of Alabama are you from? We're in Huntsville....are you an investor or wholesaler? We can talk offline if you want.....

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  • Dave Gibson
    OP
    Real Estate Investor · Huntsville, AL · Member since 2010 · 44 posts · 11 votes
    16y

    Melvin, I see you're in Uniontown...just west of Montgomery.

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  • Dave Gibson
    OP
    Real Estate Investor · Huntsville, AL · Member since 2010 · 44 posts · 11 votes
    15y

    Done deal....will post in Success Stories later today. Thanks everyone for you critique, suggestions and encouragement. Small check ($4732) considering the profit my buyer will make...but I'm happy and my buyer is happy.....time to move on to locating the next deal.

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  • Curtis Gabhart
    Real Estate Broker · San Diego, CA · Member since 2009 · 119 posts · 54 votes
    15y

    But your roi is huge.
    good job and a great start to get you going in the right direction again.
    real estate is absolutely a momentum business and hope this builds good momentum for you.

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  • Mathew A.
    Real Estate Investor · Jacksonville, FL · Member since 2010 · 60 posts · 16 votes
    15y
    Originally posted by Curtis Gabhart:
    Curious -

    Why don't people just get their real estate license instead of trying to wholesale a deal? Sounds like a friggin pain in the neck to try to wholesale UNLESS you are capable and willing to buy it yourself if you can't wholesale it.

    Curtis, I'm not understanding the connection between a real estate license and wholesaling. Why should people get their real estate license instead of wholesaling? Thanks.

    Congrats, Dave. I wish you the best in your future deals.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y

    Congrats on your deal and your paycheck. It is good to see someone new ask questions, then apply the answers in the real world and the ending result becming a paycheck for you and a winner of a deal for your buyer. Win-Win

    Now that you have this one under your belt, and before you are ready and capable of taking these down on your own, find another deal similar to this and before you find it, research strategies of how you can increase your profit through other alternative and creative means to wholesale it.

    For instance, rather thna double close the transaction and incur two escrow/title/recording fees, lock up the next contract in a trust and name your buyer as the beneficiary. You are the trustee and on funding day, you transfer your trustee position to the buyers choice for your fee. You will also want to make more than $5k on such a spread as Jason suggested. This is just one of many means to flip the deal via wholesale, there are many more.

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