Figuring first deal-input please

16 Replies

Brand new an extremely nervous. Looking for my first wholesale deal. Was just doing market research when I came across this... I think I may have found a wholesale deal, would love some input.

Property was listed at $95K FSBO price has came down to $87.5 fully furnished in less than 3 months

3bd 2 bath in a nice golf course subdivision in Florida built 1980

1956sq ft not counting an added 12x26 Lanai

Comps put ARV at $123K

The home is nice but kitchen a a few other things are dated...awesome landscaping and overall a nice home estimated $15K for rehab, mainly for new kitchen cabinets ect

I have a number in mind to offer but would sure like to here what anyone else with some wholesale/investing experience has to say. I can see $5-$10K profit for me and $20-25K for a rehabber if they are wanting to sell as badly as I think.

$123,000 minus 70% =$86,100 - $15K for repairs +$71,100

My thought was offer $72.5K and offer to do an estate sale to sell the contents for the owner...furniture is nice so this is either a winter home or they are hitting the open road. Nice furniture, but I am not keeping the property.

I also buy/sell storage units, buy leftover estate sale items etc anyway. I have one guy I could call and think I could move most of the furniture the day of closing.

Thoughts? What did I miss? Maybe they will laugh at the offer, but maybe not.

After re-reading...what I meant at the end was I have a guy that I think would purchase the majority of the contents at a decent profit for the owner or I could use my other contacts to sell the contents before even having to do an estate sale.

@Eric Robertson

How carefully did you evaluate your comps? A few really good things to do when evaluating comps for wholesale deals:

  • Look at all of the lowest sold comps over the past 6-12 months. Drive the comps to make sure they are comparable. How long did those deals stay on the market? What is the lowest sold comp that is most comparable to your prospect property? Also look at the lowest pending comps. You will start to paint a picture of as-is value for the area. Is there a lot of distressed product on the market? Does it sit or does it sell?
  • Carefully review your competition for on-market properties in your price range. Are there properties on the market at the 72k price range?
  • From an ARV standpoint really look at days on market and list price vs sales price. Drove those comps and dive into the sub-market.

I like that you can also make some cash from the furniture etc. Don't put that into the numbers but let it be the icing on the cake. I once pulled a pinball machine out of a hoarders property. It was a nice snag.

Good luck!

@ Chris Winterhalter

First off a BIG thanks! I am crunching numbers using zillow right now. I ran 10 comps in the subdivision and my average was $123.3K and the average length of time to sell those 10 was 4.1 months.

Looks like they typically list at around 150 and sell 10-20k lower than listed. I have driven the area many times as it is within a couple miles of home...but will gladly take your advise and do a drive through again tomorrow

I have found a few in the area cheaper right now, but both of them are kinda ...for lack of better words...odd. Strange windows and floor plans, late 70's early 80's retro...lol This is a huge golf course community that has a few houses dating back to the late 70's...most were build in the 80's and 90's and even a few in the early 00's before the market fell out.

Not sure how much stock to take in Zillow, so I will really need to take a closer look at the market here. According to Zillow it is slightly on the rise. Looks like $200K homes bottomed out around $90K.

My figures tell me I can make some money and pass it on to someone looking to rehab or hold and us both come out ok...but I think I need to stop and look at the market better as you suggest.

BTW..the furniture looks great...hope we can make a deal that keeps it all in play.

Thanks again

It not that common to see a house sold fully furnished. Is it an estate? They may be eliminating a lot of potential buyers by trying to do it that way. But it sounds like you could be just the guy to solve their problem, with your used furniture/estate sale connections. Good luck!

Medium team zen logo vJean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com

@Eric Robertson

I would be careful using Zillow for comps. It's been several years since I've used it however their comp capabilities were not that great several years back. I know they started to aggregate data from counties to come up with sales comps however I still think your best bet is getting sold comps from the MLS (for single family). Definitely don't use the Zillow estimate value as that can be wildly off. Are you working with an agent or someone with MLS access that can pull comps for you?

It sounds like you could have a deal on your hands though...I would quickly but thoroughly finish up your analysis and get an offer in so you don't lose the deal. Good luck!

@Chris Winterhalter

I was using what I had at my fingertips for comps. I am going to do a bit more research and see what i can come up with. I knew enough not to trust "Zestimate" and used only comps that had been placed by realtors on Zillow (it now links to the realtor when a property sells).

I was not even looking for deals when I came across this, I was basically doing market research, looking for "hot" area's. I have NO buyers list in place, no contract drawn up...nothing. lol I don't want "analysis paralysis"... but I also cannot afford to mess up a good thing if this is a decent deal.

I do know the area fairly well, and it is one of the nicest in our area. Rental comps put this house in the $950/mo range which makes it affordable for families in a very good neighborhood.

I am trying now to find a title company that will do a double closing...not having much luck here local (small towns)...may need to check Tampa or Orlando.

If the comps are good should I try to make the deal even without any buyers lined up? I hear if the deal is right the buyers will come.

Thanks again for the advice!

@Eric Robertson ,


Why not just assign the contract if you get to that point? Don't worry about a double closing. And if you put up a very small amount for escrow than you really have nothing to worry about. Every successful wholesaler I've ever talked to or heard interviewed or read about says the same thing. You don't need a big buyers list. You need a good deal and the buyers will be easy to find. You can always go back and try to renegotiate if it turns out the purchase price is too high. Worst case scenario you lose the $100 or whatever for escrow. It would be well worth it for the learning experience anyway in my opinion.

Good Luck!

@Eric Robertson

I understand your situation and I definitely didn't want to suggest that you rush into something if you are not ready.

I think wholesaling is a great business model however my thoughts on the subject are very different from others. I don't think you should get a deal under contract that you don't intend to close. There are always things that come up and that is why you can place contingencies in the contract for inspections and financing. However those clauses shouldn't be used because you can't find a buyer. In my opinion that is unethical. The best wholesalers I've seen are actually very experienced hard money lenders. Both of those business models can be very complimentary (if operated ethically). I don't want to discourage you from getting into the deal however thoroughly think through what you will do if you can't find a buyer.

@ Josh Randall

I was planning on assigning the contract, our local title companies do not want anything to do with wholesaling. We are in a more rural area, so I may have to get to a larger metro area to find a title company that can handle the transaction.

I do not want to go with transitional funding if it can be avoided but that is also another option if need be.

I am hoping if I can get the deal right the buyers will come, thanks for your input on this.

@ Chris Winterhalter

I greatly appreciate the advice you have given me on this. Never thought for a second that you were rushing me into anything, I am looking for experience and help...if anything you got me to apply the brakes a bit and take a closer look...lol

I have zero intention of ever doing anything unethical, I plan to let my sellers know up front my wholesaling intentions. It may very well cost me some deals,but it is who I am.

The way I see it is this, if the home is FSBO and they have tried for some time to sell and cannot for whatever reason and I can come in and offer to put it under contract provided I can find an end buyer (having a GREAT deal) through my contacts (which I do not have YET lol) that the seller does not have, then they can either except it or I will move on. I will make the offer "contingent upon inspection by my business partner (end buyer)"

I do see what you are saying, and I do not want to tie up anyone's property if I do not honestly believe I can close with an end buyer. That is why I started this post to begin with, to be sure I was seeing things clearly so I was not forced to back out of a deal because it was not good enough to attract quality end buyers.

I have to start someplace, and with little capital or experience wholesaling seemed like the logical solution. I can learn and perhaps earn a bit until I can buy and hold or fix and flip. But if I cannot do this without being shady, then wholesaling is for sure not for me.

@Eric Robertson , as previously stated do not base your entire deal on Zillow estimates. You need to find an agent who will comp it for you on the MLS.

Find out who you want to list it with when you're done, contact them and let them know they will have a listing if the numbers work out - you need to find the ARV before you buy it.

They should have no problem getting this for you.

Good luck

D

Your formula is good but you did not back out your assignment fee.

"$123,000 minus 70% =$86,100 - $15K for repairs +$71,100"

it should look more like

"$123,000 minus 70% =$86,100 - $15K for repairs -$5K for assignment fee +$66,100"

$66k is your MAO and honestly that may be to low of an offer. He is convisted that the furniture is adding value and it is not unless they are a professional interior designer which I doubt.

I am woundering if they have a mortgage and if it is listed with a Realtor? This deal seems to job out at me as a good deal for quick flip.

May be do something like offer to buy on seller finance or subject to, You can offer them a down payment something for now and the rest in about 4-6 month.

You could do something like offer to buy on terms at around $76K-$81K and just sell it at around $99k with some fresh paint and touch ups. at $35k less any Realtor would would consider there client to buy at that price point. I could break the numbers a bit if that would help?

@ Manny Cirino

I have done a few more comps and am waiting now on a call from my realtor to get them to run MLS comps on it. with the numbers I came up with this morning this is what I have...we will see if this holds after MLS comps.

The home looks to be in great shape... main repair would be to install new cabinets and maybe fresh paint. Thinking $10 would more than cover rehab

$123,600 x.70 = $86,250 - $10,000 in repairs - $5,000 ***. fee = $71,520

or

$123,600 -$30K = $93,630 - $10,000 in repairs - $5,000ass. fee = $78,630

I have seen both ways to figure a deal and told to go with the lowest. I was thinking the $71,520 for the house or the $78,630 for house/contents, only because I have the connections to move the furnishings via our other business.

Trying to get the owner to commit to a time to discuss it all in person. We will see how it goes after that, just afraid if I don't move quickly it may very well be gone.

@Eric Robertson the numbers definetly look good and I know anything around a golf coarse is built around 2002-2006. so the contruction may be in good condition.

What I am recommending is to wholesale it but after you own it. Usually referred to as Wholetail selling on a retail market with a wholesale price with your target buyer being and actual home owner rather than an investor.

Lets say you offer him $71,520 with $5,000 down over 20 years

clean the house up and paint it freshly

and through it on the MLS for about $99k and hope it sold over 4 months

Your monthly would be around $566 or $2,264 over 4 month

You will have about another $2,500 in closing at sale, $300 in inspections cost and $5,940 in commissions

You will have about $7,264 + cosmetics and utilities invested.

But you will net about $10,000 after sale

$71,520 + $5,940 + $2,500 + $2,264 = 87,854

$99,000 - $87,854 = $11,146

Something like this can also be done and your numbers could be adjusted and negotiated if you do a 30 year term insteasd of a 20 the month would be lowered speak with your realtor about this as well.

Just a thought my mind tends to analyse deals quick and run off track at this point.

@Eric Robertson ,

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Raymond

@Raymond B.

Thanks...started my day learning something...that it always good ; )