Question? Good or bad deal?

Question

Ok just wanted to j ask a question? So  my grandma got this property it’s currently in pre foreclosure right now .. I got the ARV for the home it’s worth 466k , 50k In rehab cost , desired profit 93k , assignment fee 20k , MAO = 233k..  is this a good or bad deal?

Tamara Deering · Answer

@Kyriek Daniels

I agree with @Barry Pekin, except that some buyers calculate the 70% rule as (ARV - Repairs) x 70% which would be $291,200 less your 20K leaves $271,200 which is about $38,000 for Grandma.  If that will get her where she needs to go then yes it's a good deal.  You can start your marketing at $326,150 and see if you get any bites, but the goal is to get this out and sold before Grandma loses more money to fees in the foreclosure process.  Make sure you ask for a deposit, preferably one large enough to clear up some of the arrears and buy some time if the first buyer under contract doesn't perform.

Good Luck

Barry Pekin · Answer

@Kyriek Daniels,

I'm not sure where the "desired profit" fits into the equation, but the general formula to calculate what a cash buyer would want to pay for it is ARV x 0.7 - Repairs.  This comes to $326,150.  Your assignment fee is the difference between that and whatever you get it under contract for.

Is it a good deal?  First ask grandma!  What does she need.  It sounds like she needs to sell sooner rather than later given it's in pre-foreclosure, and there are a lot of repairs that need to be done.  But make sure she gets what she needs.  You should do this anyway, but this time, she's.... grandma!

Kyriek Daniels · Answer

@Tamara Deering I’m looking to wholesaling

Tamara Deering · Answer

How much is the money going to cost you?  Just on the surface, you are at $303,000 without calculating holding costs and sales costs.  Calculate a minimum of 6 months holding costs between rehab and time on the market, and 8 to 10% for the cost of selling.  Sales costs are going to be about $37,000 that puts you at $340,000 out of pocket so if you can cover the cost of money and holding costs for 6 months for $33,000 you should make the desired profit.