Looking at first deal. Would YOU do it?

Question

I have found what looks like a promising deal. This would be my first deal so any help would be appreciated.
SFR-
1- ARV $400K +/- $25K
2- asking $180K
3- potential short sale and/or default on a construction loan
4- needs $110K +/-$10K to finish

Does this sound like a good deal to lock up and try and sell for $190K? Would someone want to take over a house mid-project and finish it up, in a general sense? Is this something that investors usually run away from or look for? I have never done a wholesale deal, so what contract would I use? Where would I find a good template.

Richard Warren · Answer

For ARV weâ€™ll assume your low number â€“ $375k
For repairs weâ€™ll assume your high number - $120k

(ARV X 70%) â€“ Repairs = Maximum Price

(375k x 70%) - $120k = Maximum Price

$262,500 - $120,000 = $142,500 maximum price

Using your best numbers:
(425k x 70%) - $100k = maximum price

297,500 â€“ 100,000 = 197,500

Using your average number:
(400k x 70%) â€“ 110k = maximum price

$280,000 â€“ 110,000 = $170,000 maximum price

Based on the asking price this only works if your best numbers are the real ones.  Chances are they are too optimistic.  I would be more inclined to go with the lowest number.  If you are looking to wholesale this you had better expect the low number.  Maximum price is what a rehabber would pay, it doesnâ€™t include your fee.

:cool:

David Schach · Answer

My inclination was the lower numbers too. it looks good on the high side, but not so good on the low side. in todays market i think the low side minus 10% is probably the better guess. thanks for the input.