What to Offer

10 Replies

I talked with a seller earlier today. He has a house in Renton, WA that is currently being rented out (lease goes for two more years). He wasn't sure about the value. He mentioned that zillow had it at $333k and tax assessed had it at $302k. I tried to have him provide a number, but he wouldn't. Said for me to come up with an offer. I've looked at the comps and the current as-is value would be around $320k. I'm probably looking to wholesale this to a landlord buyer.

Any ideas on what I should offer? 

Thanks

Ian

@Ian Smith You mentioned you looked at comps - what do you see as the value? If you are going to wholesale it you will want to offer a price that leaves some meat on the bone for your wholesale buyer as well as room for you to get paid.

Need more details to give an offer. 

How much rental income ? 

How much deferred maintenance and rehab is going to be needed to be done to value it at 320K? 

Originally posted by @Travis Sperr :

@Ian Smith You mentioned you looked at comps - what do you see as the value? If you are going to wholesale it you will want to offer a price that leaves some meat on the bone for your wholesale buyer as well as room for you to get paid.

Curent "as-is" value would probably be around the $320k. ARV value would be around $410k. Since there are current renters for another 2 years I was thinking that this would be a fit for a landlord buyer.

It's currently being rented out for $1700/month. 

No landlord in their right mind would pay $320K for a property that rents for only $1700 a  month. I doubt a rehabber would pay $320K for a property worth $420k when  done. 

I am sensing you do not know how to evaluate a deal or estimate what another investor might pay. Search for the 70% rule here. This is a quick crude guide to estimate what to offer an a rehab property. There are deal evaluators under the analyze tab above.

The fact there is a 2 year lease and it is rented so low relative to the value is a very bad think in my eyes. You are stuck with a non performing property for two years.

How much in repairs to hit $410k? 

A landlord will still want to get a good price on it, likely better than fair market - unless there is an opportunity for a large value increase via repairing the property.

Without intimately knowing your market - $320k for a proper that rents for $1,700 a month is not a deal I would do.

Further - if you are paying fair market, there isn't any room to get paid as the wholesaler, unless limited repairs offer a large value increase.

Originally posted by @Ned Carey :

No landlord in their right mind would pay $320K for a property that rents for only $1700 a  month. I doubt a rehabber would pay $320K for a property worth $420k when  done. 

I am sensing you do not know how to evaluate a deal or estimate what another investor might pay. Search for the 70% rule here. This is a quick crude guide to estimate what to offer an a rehab property. There are deal evaluators under the analyze tab above.

The fact there is a 2 year lease and it is rented so low relative to the value is a very bad think in my eyes. You are stuck with a non performing property for two years.

 I appreciate the input. I know other cities throughout the country offer much better rental returns. I think that my area is different. There is limited inventory and good appreciation.  I would be courious to find out what local wholesalers and/or landlord are purchasing/selling rentals at. 

Most on BP talk about the 2% rule meaning if you buy a 100k property it should gross 2k a month in rental income.

For me this is a very hard find in my market and by the sounds of it in a lot of markets. Its not mandatory, however a guideline. More realistic is a 1-1.25% around here. So for that same 100k property my current market would return around 1000-1250 a month. 

Most started out saying that if you can get 1% that you should be able to make the numbers work. 

In your scenario your pushing .5% which will be even hard to pay debt service alone. Is this a class A property? I have seen properties around here that are 300-400k that rent for 2500 a month. I personally wouldn't do that unless I had a property and had no other options next to losing the property.

@Ian Smith  how did you go about finding your comps to bring you at 320k if you don't mind me asking?

@Ian Smith  just because you talk to a seller doesn't mean there's a deal to be made. If you will give me zillow value I will sell you every house I own, its not always accurate. Further any house I have seen (even the 500k houses need some form of work completed, just painting a house ranges around 1-2 dollars a sq foot. He wouldn't give you a price = not Motivated I want as much as I can get and I dont need to sell it because its rented. But sure if some suckers wants to pay more than it is worth I will sell. There are the 1% rules and 70% arv rules you should look into they are just rules, but pretty good to live by for beginners. 

I see nothing to indicate the Owner is motivated. You sound motivated, but he doesn't.

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