Driving for dollars - found a place near me - whats next?

4 Replies

Hey BP'ers!

I have a house that looks to be an estate that no one is living in.  I checked the mail - yeah it was on the porch and noticed that the owner hasn't paid their water bill.  Found on NJ Parcels that no loan is registered - I assume that isn't always accurate but ok.  Called the tax office and received the latest address of the owner.  I am about to send the owner a letter offering cash for the house and try to follow the Mike q of podcast 077 negotiation but he never offers a price. I tried that in a mock scenario with my wife and she kept asking me what I am offering in which I kept repeating to her, what am I offering....wasn't working out in that scenario!..

I believe the ARV is 425k and house needs about 25k rehab just to clean up, update landscape, and some paint as the house is in great condition. I have done total rehab's so I believe the estimate is pretty accurate.

Need help here on a couple of things:

1) If he asks what I want to pay - do I go with 70% rule?  Whats best practice?

2) What documents do I need to get a legal agreement should the owner agree?

3) How can I find his number just in case the owner disregards my big bold WILL BUY HOUSE FOR CASH

Any advise on working this deal or how to get a sellers attention at the best price is greatly appreciated.  Thanks

1) If he asks what I want to pay - do I go with 70% rule? Whats best practice?  The 70% rule is just a guideline.  My opinion is figure out how much you need to make off the house to make it all worth your time and there is your offer.  You might want to start below that so you can negotiate though.

2) What documents do I need to get a legal agreement should the owner agree?  Just your standard contract.  You can find tons online or get a lawyer to put one together.  Some states (like Maryland) have very commonly used ones.  Either way, contracts are very common and easily found online.

3) How can I find his number just in case the owner disregards my big bold WILL BUY HOUSE FOR CASH.  If you know his name, this is a good start.  otherwise, county records for the property may list his contact info.

how about going with the 70% rule contingent upon inspection.  Once you can put a scope of work together you could potentially renegotiate based upon your inspection and show him how much it will cost to get the home market ready.  

Thanks For the posts!  I am going to start with the yellow letter to his PO box that I found from the town, and by dropping one in his mailbox.  I will see if people finder can get me more color on his phone / email - Maybe even face book to see if he is there.

I expect that the house will flip around 425000

ARV 425000 * .70 = 297500

Estimated rehab 25,000 = 322,500

Looking to make 75000 on the house so 350000 becomes my base - additional costs (closing / potential broker) bring that down as well....

Is it fair to say 305000 as starting bid..will go up to 325,000..?  Thanks again!

Question - Go in with a direct offer or try to get him to where I want on his own.  I guess this is based on the person involved...

That's not going to work. The math is wrong.

If the After-Repair Value (ARV) is $425,000, your maximum offer using the 70% Rule is:

($425,000x.7) = $297,500 - $25,000 = $272,500 - $75,000 =$197,500 is your maximum offer.

That said, trying to get a $75,000 profit on a $425,000 house is unrealistic and will price you out of the market in nearly all cases. You should consider a profit more in line with 5-10% of ARV.