OfflineHi everyone,
I'm just getting started and have gone through almost all of the rock bottom blueprint materials, and have gotten a few pre-foreclosure/reo listings back from my agent...
I'm trying to just understand the process that I should be going through to assess if a property is a good candidate for wholesaling:
- So in this example, the home is listed in the mls for $139500 and is 1604 sq ft.
I think I found the correct county website to check the last property tax records and this is what it looked like:
http://screencast.com/t/xjB2IeQX
So from this, I would gather that the total assessed value of the home/land is $165390. The total property taxes per year were $1571.55
- Next, I looked at the property appraisal report for this same property and it looked like this:
http://screencast.com/t/fZrcynrDn
So appraised value is $165390 - purchase price in mls is $139500 = $25890 difference or in other words, purchase price is listed as 84.6% of appraised value (not sure this
matters in my assessment but just stating for sake of example).
- I then ran a report on totalviewrealestate.com and it says zillow.com estimate is $144900 and range is b/t $127512 to $191268
I happen to know that this house is in good area, in good school district and looks to be in excellent shape.
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Soooo, its here that I get stuck on what to do next? How do I take the next step to figure out if this is a viable deal?
If I'm correct, if I'm planning to wholesale property to another investor, we want to try to be able to sell for about 70% or so of its fair market value, which we'll say is
$144,900. 70% of that would be $101,430.
From that, I would need to calculate the following:
(using formula denoted at http://www.deangraziosi.com/node/3975)
$139,500 Value of property
$101,430 (targeted 70% of FMV price I would sell to investor)
- $10,143 10% profit for me
- $0 in fix up costs, since I'm just assigning contract to another investor
- $0 in holding costs, since I'm just assigning contract to another investor
- $0 3% buyers closing cost, since I'm not closing, just assigning contract to another investor
- $0 realtor fee (since I assumed seller pays realtor fees)
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= $91,287 that I could buy for, and still pay all my fees, make my profit.
Soooo, I would probably want to offer a little less than that (maybe $85000) to allow for some negotiating room.
Then if they take it, thats great b/c at that price, there would probably be a good chance that I could pretty easily find another investor that would have enough upside where I could assign the contract to them. Correct?
Sorry for the long-winded question, but I'm just trying to confirm my above logic to make sure that I'm analyzing these "deals" in the right way for wholesaling.
I really appreciate any feedback all you real estate pros could give me on this type process.
Thanks again, and I hope you have a blessed day,
Mark
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You DO have to figure in holding cost, closing cost and real estate commission for your end buyer/investor - because if it's not a good deal for the investor you're trying to sell to, they won't buy!
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I'm also going through the Blueprint materials. From what I see, I would recommend cutting a deeper percentage from the property value just to cover closing costs, agent fees, etc. Then subtract your desired income from that price to get your maximum asking price. You could also subtract a few thousand for repairs (especially if they are needed) so when you hand it over to your buyer, they have more room to profit as well. If you want to talk more in depth, PM me.
I came here to understand if someone is trying to lock-up REOs, does that fall under the Double Close strategy? Since you're buying straight from the bank, don't you need proof of funds (Coastal Funding) with your offer? I hear banks don't like their contracts assigned, so the work around is a Double Close.
My logic goes:
Foreclosure/REO = Double Close
MLS/FSBO = Assign Contract
If anyone can chime in to further my knowledge, I would appreciate it!
Thanks,
Travis
Mark,
no investor is going to buy that property from you at that price!
How do you think the investor is going to make a profit if they have to pay for the rehab, holding costs, closing costs, agent's fee?
You have to estimate all those costs in your purchase offer.
Also, you should get some recent sales comps from your real estate agent so that you can get a more accurate estimate of the FMV of the property.
Oh yeah, and you cannot assign a REO property... double closing costs!
Wishing you success,
Valerie
Valerie
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