All Forum Posts by: Ronald H.

Yeah, I knew that 1% to 2% is normal here. 

I need to find an Attorney near me. I was using a guy in Rockport. I only used him to come up with an specialized purchase offer. I may be able to still use him because we got all these techie things like scanners and faxes. 

I called a few in my area, regarding this. Do you think, I was able to reach anyone?  I would have liked to have someone review this tonight and get this property under contract.

I was going to submit offer for full price, but I knew that I would need him to come down. I have been looking at a few deals recently, and it seems EVERY seller and that means some other Investor's too, seems to come up with the artificially high ARV. When I start looking at the recently sold properties, they always seem to uncover the Seller's high ARV.

Have a seller, who will accept my offer. My offer is at his price, which like most seller's is going to end up too high. The ARV being used by the seller is going to be high.

He asked for EMD. I said will $500.00 be enough? He responded to me with an email requesting $10K. Of course my offer would be based upon an Inspection Contingency,

10K is 4 % of  what he wants. He wants me to write it out to his lawyer. 

If I give it to him, I can tie the property up, but I think 10K is unreasonable a bit.

What are most of you giving for EMD's ?

Thanks for the reply, but I am unclear as to what costs you were referring to. An EMD will have to be provided by me.

Talked with an Investor Friday

He wants to sell a rehab and he is asking $240K with est repairs of $120K and an ARV of 450K. A search of sold props shows lower prices in the immediate area. Around $360 to $400K at the most.

I would like to get the right to assign this property to another Investor who has a money partner. I need to ensure that there is ample profit for me to take an assignment fee and also need to ensure my end buyer would be able to meet his Investment Objectives. 

I have two Contractor's who claim they are ready to give me estimates. So all figures below are estimates before the professional's give us theirs.

My estimated holding costs were inline with the copied expenses from Buyer C below.

What do you all think? If you will look at the first paragraph of figures, you will see the Most Likely, Best Case and the Worst Case scenario's. These figures do NOT build into account my Assignment Fee. I am thinking $5K for my fee. So if I stand correct in my assumptions, My end buy would like to purchase somewhere between the best case and the worst. And if I get the opportunity to barter with the seller and get the right to assign, I am looking at offering the Seller anywhere from $97,000 to $154,300. All figures below were provided by Buyer C in this transaction. Seller is A, I am B, End buyer is C.

Exit strategy = "Renovation costs to come in from $120K to $150K"  The house is a complete Gut out and rebuild, and the Seller's estimated rehab costs are $120K. The best, most likely and worst below accounts for various scenarios.

ARV Below was used from 2 Comps sold within a half mile of the Subject Property and the last comparable is kind of old at 7 months and 1.7 miles away.

 Any ideas on additional exit strategies? Do any of you use this Exit Strategy?

Seller A: Asking price again is $240,000.00

MLS
Address
                          Most Likely      Best Case         Worst Case
ARV $399,000,00 $465,000.00 $360,000.00
70% ARV          $ 279,300.00   $325,500.00       $ 252,000.00
Renovations      $ 120,000.00    $ 95,000.00       $150,000.00
70% ARV - Renovations $ 159,300.00 $ 230,500.00 $ 102,000.00

                            Most Likely     Best Case    Worst Case
Purchase Price $ 169,000.00 $ 125,000.00 $ 190,000.00
Renovations           $120,000.00 $95,000.00 $150,000.00
Closing Costs          $ 1,400.00  $ 1,200.00    $ 1,500.00
Total Cash to Close $ 290,400.00 $ 221,200.00 $ 341,500.00

% of CtC Borrowed 0% 0% 0%
Cash brought to closing $ 290,400.00 $ 221,200.00 $ 341,500.00
Loan Points 0 0 0
Points Cost $ - $ - $ -
Loan APR 5.50% 5.50% 5.50%
# Months Held 9 6 12
Loan Cost (Int Only, Paid) $ - $ - $ -

Utility Cost/month $ 200.00 $ 175.00 $ 250.00
Utility Cost $ 1,800.00 $ 1,050.00 $ 3,000.00
Holding Costs $ 1,800.00 $ 1,050.00 $ 3,000.00

Total Expenses $ 292,200.00 $ 222,250.00 $ 344,500.00

Most Likely Starting Price Lowest Price  Based on Comps and Estimated Sales Price
Unit 1 Sale Price $ 399,000.00 $ 465,000.00 $ 360,000.00
Unit 2 Sale Price $ - $ - $ -
Unit 3 Sale Price $ - $ - $ -
Unit 4 Sale Price $ - $ - $ -
Unit 5 Sale Price $ - $ - $ -
Unit 6 Sale Price $ - $ - $ -
Real Estate Commission $ (23,940.00) $ ( 27,900.00) $ ( 21,600.00)
Net Sales Revenue $ 375,060.00 $ 437,100.00 $ 338,400.00

                         Best Case            Most Likely                 Worst
High Price         $ 214,850.00       $144,900.00         $ 92,600.00
ROI 97% 50% 27%
Most Likely       $ 152,810.00       $ 82,860.00        $30,560.00
ROI 69% 28% 9%
Low Price           $ 116,150.00      $ 46,200.00       $ ( 6,100.00)
ROI 52% 16% -2%

Comparable Listings (MLS)

<h3>Sorry all. I placed a spreadsheet in the box above and it looked fine, now today I see it got all screwed up.</h3>

Providing the holding costs just puts me in the "Full Service Wholesaler" category. Some Investors want it, some might not care. Providing the holding costs is actually easier than establishing actual comp values in the area. There are properties fairly close that cost as much as $800K more. I did not actually look at them to see if they are similar in beds and baths.

Should I use the higher priced props?

The seller's ARV looks to me like it is higher than what it should be. I can take the 4 comps, I have average the 4 and get an average price. Then subtract value from the properties that have extra beds, baths and features to bring inline with subject property. And add to the subject property for features it has that the comps do not. I believe that I found some information on current values of Garages, Beds and Baths, and now I just need to search my computer and find them.

I like doing this, but I don't want to trust my values yet.

The Seller will meet today and I have that old fear that I might do something wrong, but I am going to try and get a C.M.A. for the property, and try to get the right to assign.

I called him to meet, but no answer. Who knows, maybe I won't get the chance to meet, because of something that I said. He has done many of these, and he probably could tell that I am new. Will he call back? It's anyone's guess.

Your advice is greatly appreciated. Great website. Thanks to all you helpful foks that take the time to share your experiences.

Title: Doing your own Comps!  Sorry about the Length. I will improve as I go.

Could possibly have an opportunity. Property needs a lot. I would live to become precise with doing my own comps and have looked. Problem is: Takes a long time and probably slowing me down, so another person will grab the deal. 

Have licensed contractor's in place, although untested. If I do not have a meeting of the minds with the seller meaning "Under Contract" with an "Assignment of Contract" contingent upon my estimates matching the seller's or around the same ballpark figures, I could have the deal, if it is that in fact, stolen from me. 

I am getting pretty good at seeing how the Town Assessor's value things, such as Garages, Carpools, etc. I am not quite ready to reply on my adjustments to my comps, so I will pay for a CMA to be done. I am going to see if I can get the assignment of contract signed first. Sound right?

Seller is not going to reveal what he bought for, and that is his perogative, so I need to make sure there is enough if a margin for me to assign to another Investor. 

Steps, I know are: Start at correct ARV with a CMA, then multiply by 0.70% to hedge against the inevitable, then continue to deduct ALL holding expenses for anticipated length of time for rehab. I have to include Taxes, Vacant house Insurance, electricity, trash if any, sewer/water, if title V is needed add that, and any newspaper advertising, mls fees, broker commissions for avg DOM for the area, and a qualified appraisal of the new value at the end of the rehab.

I would like to close with the seller and have a complete professional report of the profit potential, with all expenses itemized for each month ready for the end buyer. Do an assignment with a double close.

Earnest money will be negotiated with the seller. My thinking is, that these days, clever folks are offering more as a way of making there offers look more appealing.

I want to get this done by Monday. 

So again in a nutshell
1. I need to establish an accurate ARV with the CMA or Appraisal. 
2. Now I need to sell the seller on how my price is the accurate price for that neighborhood, and use my comps to back me up.
3.Then provide the seller with the negotiated EMD to show, I have skin in the game.
4. I then need to get the Contractor's in there to estimate the repairs. I will then use the repair estimates to negotiate a fair price. I will also try to barter on the rehab total and time.
5. Now hopefully if everything is on track, the same day I close with the seller, I will approach my buyer and give them the report with all the verified holding, broker, expenses, I mentioned above. I will allow my end buyer time to do a walk through. I will barter with him about my fee to assign. We will come to agreement, or I will try my second buyer, or use the Inspection Clause to back out of the deal without losing my EMD.

Yes, I will use a lawyer to review State Regs and ensure that my offer does not break any laws and protects me in case of a hurricane or health problems of the seller or me.

Any other exit strategies that will not be offensive to the seller here, that I could use? I know that most of the contingencies should be removed to be successful.

If I were in the middle as buyer B, would you purchase Title Insurance?  I have heard LOTS about this, and some say always and some say No. This would have to be added to my wholesale fee to get my desired income.

How is my knowledge of the procedures?  I sincerely apologize for the lengthy message. I just want to give as many details as possible. Thank you all.

I know that COMPS 4 and 5 are over a mile away and they possibly should not be used.

NOTE: There were much higher priced homes close. Should I use them if the beds and baths are similar?

Look for Owner Financed properties where the numbers work. They are out there. Work on persuading the owner to be your partner. Keep showing him the benefits of doing business with you.

Are you good at fixing broken things on a property?  Negotiate.

From what I see there are a few Turn Key opportunities near you. You just need to find a tired landlord, who wants to retire. One who does not need all cash up-front. Identify what he wants to do with the cash and meet his needs. Wants and needs with seller's are two totally separate things. Perhaps there is something about the property that can be used to purchase it. Maybe there is a lot next door that can be sold and the proceeds used for a down payment.

Maybe an equity participation with the seller would be good. You both share the income and future appreciation. Make sure you buy in an area that they are expecting prices to rise. There are some areas in Ohio and New Jersey now that are expected to suffer in the market. Research the Bureau of Labor and Statistics for specific job industries and how the area and its industries are currently doing.

If you do buy an Income Property be sure to start with a reasonable Capital Improvement account for emergencies. Use some of that 65K for that.

Good luck to you. You are young enough to really change your life if you start now. 

Hello, Bill

Am I missing something.

Have not answered any of the mailed postcards from Investor's. Reason is I need to remove the personal items. Two autos and a motorcycle. Commercial tractor for lawns, and two regular toro lawn mowers. These are the biggest items  

Can't seem to settle on area, I want to go to. Nothing keeping me here. If I can settle on the area, then I can start removing items. I would like to sell and exit before Winter and downsize to smaller place. 

So much to think of, I don't know where to start. Store items in storage first, sell home, then buy?  Buy home first, then hire moving company.

Have house that requires a Cash Purchase.

Have gotten many postcards. I have not answered any, because I need to make up my mind where I will go and what I will be able to buy. Cannot do the latter until I get offers. 

Should I require a POF to eliminate the wannabe time waster's? OR will this be asking too much?

Any assistance appreciated.