OfflineOk, let me give some detail before I get to the question.
I was talking to my Mother the other day about my parents' retirement account. My Mom is retired and my Dad still works, but they don't have much in their retirement or savings... that worries me because I know my Dad will not be able to work forever.
To make a long story short, I was telling my Mom about a property I found online and before the conversation went any further, she said, "Stop right there, I am going to put my money where your mouth is."
She said, "You are always saying you have found a deal, but you never do anything with it and then you check on it later and someone has already purchased it. I am going to front you the money to buy your first deal and then we'll see how you do. If it all works out, then we'll partner and do more deals with you so you can help us fund our retirement account and if it all goes to heck then I don't want to hear about anymore deals."
I guess I hit a nerve. 
Anyway, my only excuse (for years) after I would research a deal was, "I don't have the money for a down payment." Well... now I don't have that excuse anymore. Talk about being put on the spot.
So now that I have my finance partner, I am ready to take that plunge. I am tired of looking back saying, "If I only...." you can fill in the blank.
My question relates to one of Dean's videos about offering a lower price for properties that bave been on the market 90 days or longer. Well I am looking at two duplexes, 4 units total that have been on the market for more than 240 each. The asking price is $74,900 for each duplex and the county has the appraised values of each duplex at $150,000 each. However, Zillow.com has the market value at about $180,000 per duplex.
If I'm doing my math right, that is between 50% - 60% off ARV. If that is the case should I still offer less than asking price because they have been on the market so long?
The duplexes were completed in 2007, so there would be a very minimal about of repair work done before trying to sell or rent. I am pretty sure we could keep it under 70% ARV, which is what other DG family members tells me is the key number.
Wait there's more... Is there a rule of thumb formula for figuring what your rents should be compared to the value of the house, or are they strictly determined by what the markete will bare?
I apologize for the lengthy post, but as it is titled... I have "no more excuses" in 2009 for changing my financial future. It is all in my hands now.
Thanks in advance to all those who respond.
Hello Mr. Carter,
This response is regards to the Rents in that market. When I am looking for what the rent goes for in any market I use Rentometer.com, or I would call the property management team in that area to see what the rents are running.
If you need help navigating that site just P/M me. Looks to me like you are on your way. Good Luck on that first deal.
Lily from L.A.
Lily,
Thanks for the response. That site it really helpful.
Brian
Glad to help!
One question still remains though, should I still offer less than asking price, or would it be an insult because of how much it is already discounted?
The property was a forclosure and is now REO. There are more REO's in this area owned by this bank, so I want to make a good impression and a good deal, so I can pick up a few more of these properties in the near future from them.
I think my goal would be to structure the deal something like this. Dean mentioned this before about pulling money out of the deal.
All numbers are just ballpark.
5% Down = $3,745 (borrowed)
Finance = $71,155
P&I Payment = $450
Refinance = $125,000 (70% ARV)
Payoff Note = $75,000
Cash Out = $50,000
- Repairs = $10,000 (don't think it will be this high)
- Down Pmt+ = $7,500 (intrest on borrowed money to help out Mom)
Total = $32,000 Cash Out (for holding costs)
Rent each unit for $900 - $1,000 per month.
Approximate Monthly Cash Flow after PITI $500.
So we would still own the property and have...
30% in equity
$32,000 cash
$500 positive cash monthly
And a nice place for renters to live.
Oh and by the way, that is only 1 of the 2 duplexes.
I know we talk about going against the grain sometimes, but the one thing that bothers me is, if it is really this easy, why hasn't another investor who is more experienced than I am already picked up this property if there is that much cash in the deal.
Again all posts are appreciated. Please let me know if I am forgetting anything because this still seems all too easy.
Thanks.
Brian
Brian,
Sounds like a great deal! To be honest, don't over think the situation. If it feels that easy and you are wondering why other people haven't taken advantage of it, its a) prolly cus they didnt know about it, b) didn't take the time to do their do diligence like you have, c) didn't have funding d) aren't knowledgable. I give you an example, in one of Dean's deal's of the month, dean made an insane amount of profit on a home that was abandoned. He turned around and built a new place and made so great profit on that property. A lot of the time people think conventionally and don't see potential, so be happy that you were able to get such a deal. However remember, money is made when you buy property, not sell. So make sure that you do ALL your homework on this deal. Like, making sure its in a good neighborhood, doing a title search to make sure there are no outstanding liens on the property at which you'd be responsible, get an inspection on the house both inside and out, ask around including the owner why it wasn't picked up, etc. You never know!
As for the REO, why wouldn't you offer lower? I mean ya, sometimes the asking price can be your friend, but at the same time it has been reposed by the bank. Remember, banks are in business of lending money, not selling real estate. The longer the homes stays in their hands, the more money they lose. Try making their asking price your maximum offer. Of course if you don't get the property, its not a big deal cus you won't be emotionally attached to them, and so you'd move on to the next deal. The important thing is to not over extend yourself and know what you feel you are comfortable doing. If you are comfortable with your initial plan and the numbers are feasable for you to continue moving forward, then do it. If you feel that you can get the property at a better discount then do it.
I however think your plan is a good one. Start out that way with this property and since you can get more from them, then try offering lower then their asking price for the others.
Hope that helps!
Good Investing =0)
- The Copy Ninja
CEO
Cash Flow Financial Solutions, LLC
a subsidiary of Halo Enterprise Inc.
"Make a distinction between being interested and being committed. When you are interested in doing something, you do it only when it’s convenient. When you are committed you follow through – no matter what – no excuses. – Mike Krzyzewski , Duke Blue Devils
what happens when i send the 600.00 start up money
Copy Ninja,
Thanks for the post. I am going to call the Realtor and set up and appointment and go view the property on the inside. Continue my due diligence and try to make an offer this week.
Thanks again.
Brian
Larry,
Not sure if that post was meant for this thread or not, but I would assume you are talking about the coaching at DG.com. I don't know anything about it personally but I have read that it is definetly worth the money.
Thanks.
Brian
... YOUR MOM ROCKS MAN!
Give her a big fat kiss from ALL of us!
Can I put her on MY buyers list?
Angela,
Thanks for the response. My Mom is very cool and I love her to death. She has always been there for me. However, if I am being honest, I have to say that I get a bit nervous when thinking about using my parents money for the down payment.
You see, years ago I started a vending business with my Brother and it ending very badly and put a wedge between us for a long time. We are better now, but I vowed at that point to never do business with my family again.
If I use their money for the down payment, not only am I breaking the vow I made back then, but I am putting their money and our relationship on the line as well. At times I feel like it is the motivation I need to make sure I do a good job, but at the same time I feel that because this would be my first deal... there is a lot of room for error due to my inexperience.
Nevertheless, I will give her a BIG FAT kiss from the DG family and who knows what the future brings, she may just like this hard money lending gig.
Brian