Halfway through my FIRST deal and need YOUR advice!

3 Replies

In talks and negotiations with a motivated seller and working on getting to an agreeable price. Here is the info so far (very conservative, safe numbers). We are looking to wholesale this property.

ARV ~~ 275k (absolute lowest we project it will sell for, comps are 300-320k

Repairs = 120k (10% fudge factor included) (near-full gut job rehab)

Profit left for Rehabber: 30k 

Profit left for wholesaler (me) 5k 

Closing/holding costs ~5-10k

=== 

MAO equals 110k.

Seller originally listed property for 250k in July, absolutely absurd. we tried negotiating but he was stuck at that fairytale number so we decided to let it go. We look on zillow recently and saw it had two pending sales that were both dropped and now is off market so we decided to give it another shot. He came down to 180k for a simple cash offer but then we got creative.

We were able to convince him that seller financing would much better fit his situation, (old guy, he wants to move to florida to live out his life, and collecting monthly payments while on the beach was very attractive to him, as well as avoiding a large capital gains blow). So he came down to 152k, saying there was a little more room to negotiate. 

So I am putting together options for him with varying percentages down, differing interest rates and balloon payments, etc. I know that there is the price to borrow money, so I would rather be able to include that interest on the front end to raise the offer price for him. Which way would be best to structure this so we can get him as low as possible and most attractive to our end buyer financing-wise?


P.S. We are still looking for an investor/end buyer. If you are in the Nova DMV area and might be interested on this deal or future ones, I would be happy to get in touch and provide further info.

Closing costs to sell a $275k property will be about $20k, that leaves $10k profit for the end buyer. You'll have to buy the place for $70k - $80k to be able to pass this off as a deal for a fix and flipper

I agree with Jason. You are missing all of the Flippers costs. Its not as simple as deducting 30k of profit. The flipper will have holding costs, cost of money, realtor costs, staging costs, closing costs, taxes, and a TON of risk. I don't know of any flipper that will take on a 120k rehab for the possibility of a 30k profit. I would stick to the 70% rule (possibly higher for the area). ARV 275k*.75 - 120k rehab - 5k Fee = MAO 81k. If you get close to those numbers. Let me know I am a buyer!

I agree, a flippers closing and holding costs will most likely be $30-35k on this deal, not under $10k. Just commission alone on $275k is going to be $15-16k, not to mention taxes, adjustments, loan fees etc. I'm not sure this is a deal.

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