OfflineI responded to an ad in the local newspaper, by searching, FSBO, fixer, tlc, as is. found this gem
3 BR 1 BA appx 1200 sq foot, one owner. New furnace, water heater all appliaces stay.
Needs only cosmetic, every room carpet and wallpaper has not changed since OHHHH 1967? as well as carpet in the kitchen..lol, could use new kitchen cabinets, the ones in place are white metal
Seller has POA for Dad who is in senior care, and needs to get out of it, had it listed 3 - 4 months, no bites. Is JUST about to list with an agent on Wednesday price drop from 100,000 to to 94,000, needs cash for dads expenses.(seller has disclosed would take in the area of 85,000 but followed that up with "whatever it will take"
Here are my TWO biggest concerns, I think I overanalyze repair costs, would 10,000 be enough/too much for nice cosmetics for this size house?
TWO. Comps are ALL over the place but tax assessed at 122,000...this is high end compared to comps, but in the area.
AM i rediculous if I start my offer in the area of 55,000 based on the "low" comps, with the intention of negotiating.
I know this guy is going to want to negotiate if not laugh at me all together, I want this offer accepted, i panic up until this point for fear of bad numbers.
Ok advice, thoughts, suggestions, and swift kicks in the rear welcomed 
It sounds like you have a very motivated seller. It is obvious that you are going to have to bring the house into this century and that is going to cost some money. I would go as deep as you feel comfortable ($30k, just a ballpark) then bring in some contractors to get bids and see where your at! Obviously you will already have an inspection contingency in the contract, this when you get the bids. Good Luck!
What do the comps look like inside? Are they just $10,000 in paint and carpet or do they have nice kitchens, baths, landscaping? If they are 1967 junk with just a minimum lip stick job and selling in the $115,000 range you are good to go.
How is the roof, windows, furnace, water heater?
Kristen, to be a good wholesaler you must look at this property from an ARV standpoint. What and how your BUYER will make money. He/she is going to rehab/remodel and sell to make Money right?
What is the after repair value on the property. What are fixed up comps selling for? Not junk, REOs or short sales, but nice houses.
Then you must determine what it will cost to bring that ARV.
Example: After you do your research you determine that the ARV is actually $110,000. This is not the absolute most the property would ever bring, but a number the property will sell at within 90 days.
Then you determine it will cost $25,000 to make it nice enough to bring that retail price.
You offer $110,000 X 65% = $71,500 minus repairs = $46,500 offer price.
You sell it to your buyer for 70% of ARV = $77,000 minus repairs = $52,000 sale price
You gross $5,500.
This is how your buyer sees the deal
Buy it for $52,000
Fix/up $25,000
Sell it for $110,000
Commissions, closing costs, utilities, taxes, insurance, cost over runs. = $11,000
Net profit is $22,000. This is a deal most real investors(fix/flip)will take. YOU must KNOW what your buyer will make and understand all his expenses to be a good wholesaler!!
These numbers are based on a cash deal. What if your buyer has hard or private money costs? Take his money expenses out of the net profit!
These percentages can vary depending on the local market. In California you won't get very many deals at 65%, more like 85%. In Detroit or the Twin Cities you may get them for 50%
Kristen, you say you really want this deal. Remember, and this is critical, you only want this is the numbers work. It is numbers NOT a certain property or deal. Numbers only and you must have accurate numbers to make an intelligent decision. Make the offer based on what you KNOW you can pay, then on to the next one.
Good luck!
Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
that 10-12, does it include material & labor?
Kristen,
It can be said we can make a deal out of anything with creativity, but the truth when wholesaling is it's only a deal and you only have a deal if you have a buyer.
You must know what your buyer will make and how he/she thinks.
A tip- when you look at the updated, move-in ready comps (the ARV's), you will be trying to match the updates on those comps to get to the ARV you use in the equation.
Matt says a cosmetic only/ rent ready rehab can be done for $6 sft when you are experienced.
The "low" end, like Keith says should be calculated at $10-$12 psf. When you have 40 years of updating to do, like Michael says, you should figure $20 psf. If it happened to be luxury, you go up from there.
I feel comfortable with Michael's figure of going in around $46K. Your number is never too low and never something to be embarrassed of-- you are the expert and you know what you're doing. It has to fit and that is the stance you take.
Do it!
Never, Never, Never Quit, N3Q
"Nothing happens until you place an offer."
"Skip Deal #1, go straight to Deal #2; it's so much easier."
"There is nothing so useless as doing efficiently that which should not be done at all." — Peter F. Drucker... so, "Don't sweat the small stuff." -R.Carlson. "The greatest mistake you can make in life is to be continually fearing you will make one."~E.Hubbard, The Note Book, 1927...so, Do it for the right reason and "Do it with a headache!" - Dean Graziosi, Weekly Wisdom #176
You guys are awesome. Sometimes I feel like I ask too much, and surely get feedback from everyone that is worth more than you know!
Tina1 & Michael, i like the idea of presenting the offer using sq ft/price to repair formula, makes it easy to explain to the seller and for me to understand.
Everything major is in good repair, the owner took good care of it other then the cosmetic, roof and major appliances are in good shape.
I've got the buyers cash, some wanting to flip and sell some wanting to hold. Speaking of....
Can someone break this down down for me for some reason I get reversed when it comes to the math....can someone give an example of a buyer wanting 65% LTV (i do feel silly asking this ha!)
Hey Michael in your layout you said you offer $110,000 X 65% and then Sell it to buyer for 70% of ARV. My Question is how did you determine the 65% and 70%.
For thou, O God, has proved us thou hast tried us, as silver is tried. Thou broughtest us into the net, thou laidst affliction upon our loins. Thou has caused men to ride over our heads, we went through fire, and through water, but thou broughtest us out into a WEALTHY PLACE. Psalms 66:10-12
Finally got comps on the recent sells from my agent, just submitted my offer of 47,177 to my seller.
Crossing Fingers!
Hope you get offer accepted!
hopefully that offer goes through and you get that deal done(:
yesterday is history, tomorrow is a mystery, but today is a gift. That is why it is called the "present."
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