Good Deal??

That all depends on what you want to do with it? Do you want to wholesale it or fix and flip or buy and hold. Another question to ask your self is how much work does it need and how much are you willing to put into it. Then you will need to ask your self if all that is worth that low price? Is it in a good area is another good question.

I don't know the Cleveland area, but some things you may want to avoid right now. This property looks like it is a short sale. These properties can take months to do and at one of our recent WINGS meeting, we had a lady who specializes in short sales. I personally would stay away from it until you do a few deals first. Lisa told us why they take so long and explained a lot that can delay them. ( but a good agent can get a short sale through in sometimes a month, I know one here that has done it).
And you still would need an end buyer unless you want to buy and hold.
If you would like to assign a property, try to stay away from Bank owned at first. An agent will put in an offer on a house for you and can put "or assigns" in it.
If an agent tells you they can't do assignments, find another, as some of them really don't know. My first agent and first assignment contingency, I had to explain to the agent. He had never heard of it. We were writing up the offer at his office and another agent came over and told Chad, the agent that I was right and showed him how to add it to the contract. This was not a bank owned property. I then advertised it before my closing date.
But for this property, run comps, check out that area for crime and put out ghost ads for a property like that.
If it doesn't sell as a short sale, it will go into foreclosure if the owner can't save it.
But do your due diligence on it first before considering if this would be a good investment.

Thank you both for answering. Right now I have not done a close yet so I am looking up "practice properties" to learn what is good and not good.

I do not have any money right now so I am looking to wholesale and assign a contract over. I have also been looking for cash properties.

I was trying to find pre-foreclosures but a lot of my searches for them actually show all foreclosures.. I want a motivated seller though so I can get my price low enough. I read that it shoud be 40-75% off the ARV

The due diligence I would need would be? repair value, the area, crime rates.. anything else I am missing?

And most important is your after repair value. Run comps. And can you sell it to someone?
Getting out there and making calls is a start. Remember the Lord can't open doors if you aren't up and moving towards them.

Asking for 75% off the ARV sounds like a lot..

I used a zestimate on zillow because I don't know how to calculate the ARV and thought that was the closest to it.. and on a 22,000 dollar house that would mean the lowest number I ask for would be 6,000? That sounds insulting to try to ask for it that low.. is there a better range of percentages to use or am I calculating this all wrong?

In different areas of the country things work differently. You will find different sources that will be able to advise you best for your area. You are located in a Primo area for investing right now!

If you have a good title company there, set up an appt to go in and talk with one of their reps. You want to go in so that you can start building a relationship. Don't be afraid to tell them that you are starting out and ask what kind of farming tools that they may offer. That is where I got my cash buyers in the last six months list, my absentee owners list and my rep set me up so that I could go into her site and pull my own property profiles. (I am not guaranteeing they will give this to you, but they might.)

The property profile is where I go and type in an address to get the prop owner's name, find out if their mailing address is the prop address or another address (absentee owner). It gives the history such as when it was purchased and for what price and if there were any mortgages ever taken out against it.

Best of all, it gives me all the latest comps in the area for similar SOLD properties.

When you are figuring your comps (to see if "it's a deal") you want to find similar props as far as number of beds/baths. you want the square ftage to be plus or minus 10% of the size and within 10 yrs in age. Within 1/4 mi and SOLD within the last 90 days.

Say you have 5 of these comps. Add all 5 SF (square footage)and divide by 5 (number of props)= avg SF
Add all 5 of the sold prices divide by 5= avg price.
Avg price divided by avg SF= avg amt/SF for props in this area (according to these comps)

Take SF of your target prop x avg amt/sf = ARV

Take ARV x85% (which would be closing costs, holding costs, etc)
Subtract repair cost (until you are able to get in to see it, a good rule of thumb if it doesn't look too bad is SF x $10)
Subtract what your assignment fee will be
Subtract amt of profit your buyer needs to make (ask them)

Then you will have your maximum offer.

It doesn't matter at all what they are asking for the property. They can pick any number they want. All that matters are your numbers. That is EXACTLY how you know if it is a good deal or not. Do not pay any more than what your numbers tell you. Do not get emotionally involved in the prop. It's all numbers.

Good luck.
Karen

If the house is valued at $100k, and they are asking say $80k and needs work of about $15k, I personally would shoot for an offer around 50-60% of the asking price. Now some houses you can get it for less. Such as a property that had a FMV here of $150k that I looked at. They were asking $105k as an REO.
Another investor from our area offered $70k and they turned it down. He waited 4 months and found the property now at $69k. It sold for $58k. The repairs were under $25k and he is leasing it out when done with repairs.
In our area they had our market go up. They said that houses that sold for $29k for example are now listed at over 40k.
It will depend on several things as to if you can get the price down. But offers also depend on who had the house, if it is a HUD.
Best to check out your area on what homes are selling for, and run numbers.
You may be shocked and get something very cheap compared to what you thought, then again, what you think would go cheap, may never go down. There are reasons for the banks to go both ways on different homes.
As Karen said, sometimes you get so overwhelmed, that soon nothing makes sense. First step is to find what route you want to go in this business.
And people on here all have different ideas and you will get excellent advice and direction.

This, of course, is only one way to do it.

But you CANNOT just base comps on Zillow or Trulia. They are guides ONLY and are not usually real accurate!!! This is also where finding a good agent comes in handy to help you with comps but you don't want to burn them out.

Karen

Thank you to Karen and Sandi for your advice! I am taking all of this information in and I feel like today alone I have learned so much more and have some great notes to move forward with.

There is another way to value the property and that is the income approach or cap rate. What return the property will generate in relation to the investment. Sometimes it does not pencil out at the same arv as price per square foot.

I am confused on what a short sale is.. If a house is in pre-foreclosure do the homeowners still have control over it, or is it turned over to the bank? I was trying to look at pre-foreclosures to get the best deals and that can still be assigned. I do not have any money so I am looking for wholesaling investments

The best way to find properties is NOT on MLS or online. Everybody knows about those.

The best way is Driving For Dollar$ !

Choose the area where you want to invest. When doing this choose an area that is approx 50% owner occupied and 50% rental. An area that is safe and families will want to live in. NO WAR ZONES! A bread and butter type neighborhood.

Get a map of that area and take it to the printers and have them blow it up for you. Black and white works best. Block off an area that is about 1 mile x 1 mile. Now you start driving slowly up and down EVERY SINGLE street. As you do the street mark it right on top of the street with either red ink or a yellow highlighter.

You are looking for empty properties, some may be boarded up, some not. Look for properties that look distressed even if people may still be living in them. Write down the addresses. When you are doing this it is a good idea to have magnetic signs on your car doors saying "I Buy Houses! xxx-xxx-xxxx". That way people will not shoot at you (joke) thinking you are casing the neighborhood! Seriously, though, get them, only the shooting part was a joke. (Check out Vistaprint.com. Best deal. Get the large size.) You may want to take a pic also, so that you remember which prop it is.

Put bandit signs up all around your area. Especially if there are a lot of houses for sale.

Then you go home and research the owner name and addresses. (Some areas have online access to tax assessor records and you can find info there). This is when you use what is called a "yellow letter". That will have to be a different post or you can research on here. DO NOT PAY FOR A YELLOW LETTER SERVICE! Easy and cheap to do yourself!

This is an excellent way to find leads that no one else is getting, so no competition!

Karen

This is definitely true, Tom, but she is just starting out and that will get her even more confused. She needs to get basics down first.

Karen

On a SS the house is upside down-meaning the mortgage owed is more than the house is worth. You make an offer and the sellers have to agree to it but then it has to be approved by the bank. This is where it starts getting sticky.

The seller will have to fill out a hardship letter and all kinds of paperwork has to be done and it can take months to get everything processed and even then they can say "No!". This is not my area of expertise, so i will not try to go into detail, but that is it in a nutshell. I, personally, will not touch them! Others, love them! As someone said earlier, (I think Sandi) not recommended until you are more proficient.

Karen

Are you coming out of your haze yet?

Thank you for your explanation of short sales.

I am now going to look up bandit signs and yellow letters! Thank you for the helpful information. I realized people could find the houses as easily as I was.. and that to me meant that there wasn't a good deal involved because I, the middleman, wouldn't be needed

A lot of people on this site should stay away from the internet as 1) if its on there everybody knows about it; 2) the internet can strip newbies of their money quickly; 3) you need to spend time cultivating your own area to develop good sources of leads, properties, connections and a future.

Lot's of good advice on here.

I'm assuming you want to wholesale.

But to make it SUPER simple for you, ask yourself this one question: Would your buyers buy that property from you?

If you don't have a buyers list, quit wasting your time on anything else. You can't know what to look for without having a buyers list. All areas and buyers are different.

I have been asked if bandit signs are illegal and questions about yellow letters, so I feel that it is better if I am going to write all this it should be out where more people might benefit.

Bandit signs are ALWAYS illegal to put up--hence the name! Do not put your real phone number on them. Go on google and get a free phone number that will forward to your phone. It's untraceable.

As far as yellow letters. The magic to yellow letters is that they are hand written and look very personable. People do not like to feel like a computer just printed out a bunch of letters and just stuck their name on one. But if you are going to do this biz SERIOUSLY, who can write that many letters!!??!! I mean, your hand would fall off!

So I developed my own technique. VERY, VERY simple!

Get a WHITE legal pad, but the same size as regular printer paper. (I don't know the measurements off the top of my head.)
And an Ultra-Fine black Sharpie.
Get a ream of the lighter yellow computer paper.

This is how you do your letter on the WHITE (VERY IMPORTANT) lined legal paper:

Leave the top couple of lines blank. (When it comes time to actually mail out a letter, you will use the same sharpie (ultra fine) to put the date on top right hand side.

Hi!

My name is _______________________ and I am interested in purchasing your property at:
Line 1 blank
(Leave four lines blank here) Later when you have a prop address you put street name and number on line 2
City, state, zip code on line 3
Line 4 blank

I am a CASH BUYER and can close in less than 30 days!

If this is something that you might be interested in considering, please call me as soon as possible! (I underline "as soon as possible" Do not type this on your letter)

Sincerely,

Name (first and last)
xxx-xxx-xxxx

Put this letter in your printer and print on your yellow paper.

Next, Get a blank piece of the white legal paper and load it to be copied.

Reload printer with the yellow letters you just printed. Do a tester to make sure that they are loaded so that they will now print blank lines on the BACK side of your letter, with top matching top on front..

Now you have a perfect yellow letter that will look handwritten when you use the same marker to put date and address as needed.

Go to somewhere like Staples and get the brightly colored invitation size envelopes. Fold your letter in fourths and mail. Hand write your address and return address. Use stick on stamps not a postage meter.

I can not make it any clearer or more simple unless I do it for you and that's not happenin'!

Karen