Did I let a deal slip through my fingers?

Real Estate Deal Analysis & Advice
13yFollow

Did I let a deal slip through my fingers?

Chris Lipumano
Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote

Hey Everyone,

I wanted to get everyone's opinion on a deal I might have slipped through my fingers.

I got this lead from a postcard mailing sent to absentee owners. I did my research and placed the property with a ARV of 550000 (conservative) to 575000. My MAO was 350000 depending on repairs.

I met with the seller and checked the house out. I realized this was going to be a full gut rehab. After we got to talking the motivation was there. The property was too big for him to take care of. He was an elder man who was ready and retire to his other property next to the beach.

In the end my offer was just to low for him. He owed 160,000 on the house and wanted 460,000 for the house. I called him back a few times to follow up but wouldn't budge on price.

I checked redfin yesterday http://www.redfin.com/CA/San-Diego/6808-Camino-Estrellado-92120/home/6243637 and realized that the property was bought at 481,500 and is now being listed for 649,900. The investor who bought this property did a great job. Beautiful rehab and in a perfect amount of time. His mark up was close to 80,000 more than my ARV of 550000-575000.

Should I have signed a contract with the seller when I had the chance? Any advice is appreciated, thanks!

0Reply
59 views

Most Popular Reply

Tim G.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
13y

Okay, well first of all. KILLER attitude Chris.

I could go on and on about that 70% rule but instead I'll go over what I consider the most important rule. KNOW YOUR MARKET.

Maybe that rule works elsewhere but I find it so misleading for it to be the spoken gospel of rehabbing because it is not and takes no consideration into different markets.

The person that bought your deal I sold them one in December at 82% of ARV less repairs. They did well on it.

Know your market, know what buyers are paying for deals. You can see people operating on slim margins that come nothing close to that rule. That should teach you several things.

1. You want them to be your buyer
2. You see the slimmer spreads people are willing to work with.

Maybe the investors here don't want to work with that but they aren't everyone. There is a buyer for everything and I cannot wait to show a current deal I'm working on just to prove that point even further.

Death to the 70% rule in SoCal if you ask me, well if you can lock it up for that then awesome. But sell it at the 82-85% range.

Remember, know your market! Don't let someone in Ohio tell you what values deals should be done in San Diego or vice versa it just doesn't make sense.

1Reply
See this reply in the discussion

23 Replies

Jump to latestLatest
  • Marina Fang
    Glenside, PA · Member since 2013 · 7 posts · 0 votes
    13y

    Listed doesn't mean it will be sold at that price. Depending on how long the property will need to sit in the market and the final price of sale. It may not be worthwhile risk. However you could have get the property under contract for $460k and wholesale to the other investor at $480k, that would be easy $20k profit if u get paid assignment fee.

    0Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Yes, that's exactly what I was thinking :(. I even went over the numbers with another San Diego investor and we came up with the same Arv.

    0Reply
  • Glenn Espinosa
    Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes
    13y

    List is pie in the sky unless the other investor added some sq ft. Wait till it's sold before you kick yourself.

    I did a stupid quick zillow ARV and got 559k so you were right at where I would have been also. Then again I have no idea about Cali pricing.

    Sticking to your numbers should be celebrated, not frowned upon. As long as you're adjusting to the market and doing your math right, of course.

    0Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Thanks Glenn!

    0Reply
  • Luke W.
    Investor · Edmond, OK · Member since 2011 · 166 posts · 31 votes
    13y

    Definitely don't kick yourself for that. The only argument I could make for being upset is that the market does what it wants, and technically the home is worth what someone is willing to pay. That investor was willing to pay much more than the "typical investor", so I guess he thought differently. But, he may have been the only investor you could have found that would want it at that price, never know. Don't worry about it one bit.

    0Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Thanks for the response Luke.

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    see below.

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    My friend wholesaled that to the buyer. I've sold them most of my deals too.

    While the above advice is solid, they aren't working in San Diego and this market is lightening fast. That buyer buys 20 deals a month, they know their numbers and have proven me wrong on deals I thought were one value when sold to them only to sell for 20-30k more. Good for them.

    I'm guessing you are newer? Don't let it get you down you are making the right moves. My best advice is find a mentor and make sure whoever you are comparing values on is really on top of their game.

    Lastly if you are using the damn 70% rule you need to stop. It doesn't work here and will cost you a lot of money on missed opportunities.

    0Reply
  • James Seever
    Escondido, CA · Member since 2013 · 10 posts · 0 votes
    13y

    Good point about the 70% rule. I'm glad you brought it up. I had looked at it, did the math and come to the same conclusion. There is no way it works for the So. Cal market.

    0Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Hey Tim,

    Nice to see some fellow investors I can network with. Yes, my offer was based upon the percentage rule. It will be hard to shake it since that's what I've been learning the past few years but I'm all ears. I've become extremely conservative when it comes to numbers but I'll get better when I'm more active and diving into the trenches.

    Great point, I should of known better that the San Diego market is lightening fast and most properties on the MLS are getting multiple bids.

    This makes me wonder now if I should of made better offers with past sellers? Lesson learned.

    Keep the great advice coming guys, Thanks!

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    Okay, well first of all. KILLER attitude Chris.

    I could go on and on about that 70% rule but instead I'll go over what I consider the most important rule. KNOW YOUR MARKET.

    Maybe that rule works elsewhere but I find it so misleading for it to be the spoken gospel of rehabbing because it is not and takes no consideration into different markets.

    The person that bought your deal I sold them one in December at 82% of ARV less repairs. They did well on it.

    Know your market, know what buyers are paying for deals. You can see people operating on slim margins that come nothing close to that rule. That should teach you several things.

    1. You want them to be your buyer
    2. You see the slimmer spreads people are willing to work with.

    Maybe the investors here don't want to work with that but they aren't everyone. There is a buyer for everything and I cannot wait to show a current deal I'm working on just to prove that point even further.

    Death to the 70% rule in SoCal if you ask me, well if you can lock it up for that then awesome. But sell it at the 82-85% range.

    Remember, know your market! Don't let someone in Ohio tell you what values deals should be done in San Diego or vice versa it just doesn't make sense.

    1Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Knowing my market is definitely something I need to always remember. A Keller Williams agent told me the same thing too.

    Yes, when the time comes please post about the current deal you're working on.

    Thanks again, Tim!

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    A heads up to those who suggested this deal was listed or valued improperly.

    Sold @ $645k on the market for less than a week.

    Hope you are doing well Chris!

    0Reply
  • Mike Osterman
    Specialist · Novato, CA · Member since 2012 · 190 posts · 57 votes
    13y
    The value of nothing for sale. Priceless.
    0Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Lesson learned. Time to move on and keep looking for deals =)

    1Reply
  • Michael Corona
    Contractor · Phoenix, AZ · Member since 2013 · 5 posts · 2 votes
    13y

    The rehabber did a beautiful job.

    0Reply
  • Jimmy Hong
    Flipper · Irvine, CA · Member since 2013 · 349 posts · 45 votes
    13y

    I have to agree, 70% rule does not apply here. When I was at the court house steps, there was no way I would have been able to purchase any properties using 70% rule. I had to adapt and pay more knowing that neighborhood and city would sustain the higher price. And lets not stop there, 2% rule doesn't apply here, 50% rule doesn't apply here (actually not sure about 50% but you get the point), basically any rule that works in mid-America doesn't apply in California.

    0Reply
  • Michael Woodward
    Real Estate Investor · Greenback, TN · Member since 2012 · 268 posts · 115 votes
    13y

    @Chris Lipumano . You did the right thing by sticking to your numbers. If your numbers are always based on solid research and thorough knowledge of your market, you should always be ok. The moment you step into speculation, you're vulnerable to lose everything.

    Opportunities are plentiful, so don't worry about the one that got away.....and finding a good opportunity takes a lot less time than digging yourself out of a bad one. Use it for knowledge going forward. If you study this case thoroughly and commit it to memory, next time you'll be ready to pull the trigger.

    0Reply
  • Chris Lipumano
    OP
    Real Estate Investor · San Diego , CA · Member since 2009 · 23 posts · 1 vote
    13y

    Thank you everyone for your feedback!

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y
    Originally posted by Michael Woodward:
    @Chris Lipumano . You did the right thing by sticking to your numbers. If your numbers are always based on solid research and thorough knowledge of your market, you should always be ok. The moment you step into speculation, you're vulnerable to lose everything.

    Opportunities are plentiful, so don't worry about the one that got away.....and finding a good opportunity takes a lot less time than digging yourself out of a bad one. Use it for knowledge going forward. If you study this case thoroughly and commit it to memory, next time you'll be ready to pull the trigger.

    When you are locking up a deal with an inspection contingency to shop around to buyers you literally have nothing to lose. This is something you have to understand when wholesaling a deal, you aren't the rehabber and you cannot look at it as if you are. It will cost you money, $20k to be exact here.

    I don't mean to sound harsh but when people who aren't in the field of wholesaling give advice that is detrimental to the success of a deal it strikes me as something that should be pointed out.

    0Reply
  • Michael Woodward
    Real Estate Investor · Greenback, TN · Member since 2012 · 268 posts · 115 votes
    13y

    @Tim G. , Chris' original post indicated (or at least implied) that he intended to gut the house and do the rehab. There's no indication that his ONLY intent was to wholesale the property. If that were the case I might understand why you would feel that I was off-topic.... but in this case I think you might have forgotten his original question. Perhaps your personal focus on wholesaling distracted you. Regardless, I think BP will be a better place if you can resist the urge to rebut other people's comments. Feel free to share your opinions and perspective but you need to respect the opinions and perspective of the rest of us.

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    you're right, my apologies.

    0Reply
  • Michael Woodward
    Real Estate Investor · Greenback, TN · Member since 2012 · 268 posts · 115 votes
    13y

    Thanks @Tim G. Best of luck in your investing!

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free