All Forum Posts by: Sean K.

Never mind, I just realized that I'm doing the math wrong. The $120K was already figured in with everything else to equal my MAO. I don't know what I was thinking, but I guess I'm just trying to get the math down.

Thank you for your reply Shawn (by the way, good name!)

So everyone is getting a percentage of the sales price, thus paying everyone, and leaving no monies left over (after all have been paid) - is that correct?

If a realtor lists a house for 200K, is this amount based on the ARV, or after the mortgage is paid off?

If the realtor sells the house for 180K, and the owner still owed 70K, then there would still be 110K remaining.  Where does the excess money go after everyone (bank, agents, brokers, seller, etc...) has been paid?

I understand how the money works on the investor side, but not the realtor side.

Thank you for your reply Ken. 

So, if they have a mortgage (loan) on the property, I'll also have to figure that in with my offer, while on the phone?

In other words, how am i negotiating a price on the phone south seller, when i don't know all the information, such as the repairs, or othet loans or even liens on the property? 

I can't negotiate a price on the phone till i get that information, and calculate it out.... right?

Please help me to understand my calculations.

This is an example:

Comps on a property = $250,000 (ARV)

Owner originally got a loan for $200,000

Owner has paid $80,000 on loan so far ($80,000 equity)

Owner has an outstanding loan balance (or mortgage) of $120,000 ($200,000-$80,000)

Owner is asking for the loan balance of $120,000 + $15,000, for a total of $135,000 (asking price)

So, if I have an ARV of $250,000, and I subtract the following (to get MAO):

$3,750 > Acquisition costs (1.5% of ARV)

$17,500 > Sales costs (7% of ARV)

$10,000 > Holding costs (4% of ARV)

$20,000   >   Profit (I want to make on flip)

$33,000   >   Repairs (based on $15 per sq ft on a 2,200 sq ft property)

$3,300   >   Hedge (10% of Repairs)

= $162,450 MAO (Maximum Allowable Offer)

Then, do I take this amount and subtract the $120,000 mortgage (loan) = $42,450, and then subtract out the $15,000 that the owner would like to have, leaving an additional $27,450 for profit?

I think I'm doing something wrong, but I can't figure out what it is. Can somebody please let me know if my calculations are incorrect, and if so, how to fix them?

Thank you! :)

I have read some of the phone script forums, but I still have some questions. I'm getting ready to start making phone calls, and getting out meeting potential sellers, so I want to make sure I do these things correctly. I know there is no certain way to do it, and that I should just get out and start doing it, but I do focus a lot on preparation.

I know some of the questions to ask the seller, but I don't know the order in which to ask them.

Am I supposed to run my comps on the address first, so I have an idea of what the ARV should be, before I talk to the seller on the phone?

Then, on the initial phone call, I verify and/or ask about the property specifics, including the property description, seller's motivation to sell, and the financials of what the seller wants, what the seller thinks it's worth, etc...

At this point, what numbers am I running in my head to see if this seller could be a potential deal?

Should I know whether this is a good seller to make an appointment with, based on the ARV, and what he wants for the property?

Do I figure in the mortgage payments at this time (if the seller even gives them to me)?

What if the seller won't give me the mortgage info?

What about asking for the equity info at this stage, or can this be done after a physical meeting with the seller?

What determines then, if I should setup an appointment to go see the property (what calculations make sense)?

Then, am I supposed to setup the appointment to go see the property, so I can include my potential repairs in the final number calculation (MAO?), and start building rapport with my potential seller?

I have all this information in my head and on my notes, but I'm having a hard time organizing what needs to be done at what stage of the meeting(s).

Thank you Chance, Frank, and Lindsey. Those are very good points. It's better I guess, to check with a local realtor in my area. I have an out of area realtor, that has hooked me up with daily MLS stats, so he may be able to help me with this as well.

Again, thanks for your all your advice :)

Does anyone know of a good source and/or site that can show you how quickly homes are being sold in a particular area, from the time they were listed. I know that Zillow and Trulia can do this on an individual basis, but I'm looking more for statistics. My biggest fear in investing in a property, has to do with the question "what if I end up holding my property for a long time, because people aren't buying that much in my area?". I don't want to have a piece of property that's going to cost me a fortune, because the market it so slow in my area. There are a lot of pre- foreclosure auctions going on around where I live, but that's also making me wonder if anyone's really buying in this area, or going to buy on this area. I want something to show me if property purchases are happening a lot around where I live, and if so, where and how many. 

I'm not a lawyer or attorney, but seeing as how so many have been affected by this, and the amount of bad practices that they're performing, i suggest some of you get together with an attorney, and see if you can go after this company with a class action lawsuit, and see if you can not only drop your remaining charges, but get back at least some of the money you put into it. Just a thought.

Thank you Aaron! I just wasn't sure if there was more to it, or other procedures that were different from the buying strategy. 

Sounds simple enough.

Thanks again!