I've found an off market opportunity and I'm not sure if I should try to raise the money to renovate it and resale it, or buy it an wholesale it. Here is the high level of what it looks like:
If I flip it:
- Acquisition price $290,000
- Est. Closing costs (buy and sell) $45,000
- Est. renovation cost $50,000
- Est post renovation Sale price $420,000
- Est Flip Profit: $40,000
OR I could purchase the house, and wholesale it. As-is listed homes in the neighborhood have sold for about $330,000. In my mind, those numbers look like this:
- $290,000 purchase price
- Closing cost (buy and sell) $18,450
- All in - $308,450
- Potential profit ($330,000 -$308,450= $11,500
Here's the rub - I don't have the cash to acquire, flip and/or wholesale. I'm seeking the communities guidance on how to present this to investors. If doesn't look like the earnings on a flip are enough to entice anyone (I'd need a loan of $385,000 in exchange for half of $40,000 when it's sold). And the wholesale side presents the same challenge. I'd need an investment backer to purchase, and perhaps pay some of the closing costs.
Interested in your thoughts and/or guidance.
@Nicole Martin If you wholesale it, wouldn't you just use transactional funding to pay for it? As long as the flipper sees you eye to eye on the ARV and repairs/updates numbers come out the same? I'm curious cause I'm a newb. I hope a seasoned investor sees this post and replies. Good luck!
For the wholesale portion, @Motu Lemafa is absolutely right. If you have no money to buy it, transactional funding is perfect for the purchase since this type of funding typically provides 100% funding. Then you attain your profit from the difference between the 2nd closing less the 1st closing less closing costs and transactional funds and fees. I'd be happy to answer any questions you may have regarding this type of funding. PM me.
So appreciate he guidance BP family! @DuaneOrtega, I will definitely PM you.
I am also in Denver. We all know this market is red hot and difficult to get discounts. That said, you seem to have a good handle on your numbers. Congratulations on finding this one off market. A hard money lender is going to look for you to have some "skin in the game" and the lenient deals out there are around 70% of ARV so possibly around $90K from you. Wholesaling using transactional funding could be an option. Experienced rehabbers would like more of a discount but also can likely reduce your estimated renovation costs and are having to work at lower margins in this market.
Feel free to PM me if you would like to discuss transactional funding.
LOL, @Nicole Martin feel free to PM me about transactional funding, or using seller financing and paying the note off 30 minutes later at your next sale, or, in rehabs, partner with the owner with a TIC and TIC Agreement, you repair, he gets his price your get yours. All of this is wholesaling by taking a title interest, don't start flipping contracts.
But, my thought is too, are you adding value piling on closing costs, is your sale price arbitrary based on your all in, might as well throw in a few car payments sine you drive over there (LOL). Meaning, what is really the ARV.
For 11K, I wouldn't buy and rehab, you need about 15% over costs to consider taking a crew in there, IMO. Probably isn't enough room in that house. Good luck :)