Please Help/Advise

Did your realtor show you comps to back up the $50k asking price? Who do you have lined up to do the repairs? And is this their estimate? If you don't have a buyer lined up and you don't have the money and need a HML, you might hold up on making this deal.

I found a house with over $200,000 of equity in it, but the bank requires proof of funds in order to submit an offer. I do not think it would be wise to ask the buyer to provide the money seeing that we do not know each other at all, and why would he pay me a fee after the fact knowing that the property is not under contract for assignment. Would love some advice on how to still cash in on this deal. Thank you!!!

Could you not find a HML in Colorado or could you not find one that would lend on this particular deal? Most HML in Colorado will lend 70% of their appraised ARV on the property.

So lets say they say: Yes it is worth $50,000 with the $7000 contractors estimated work done.
So we will lend you 70% of ARV at 4 points and 15% interest. The interest must be paid monthly until it sells. 9 month balloon.

We will loan you $35,000
4 points payable at closing = $1400
15% interest= $437.50 payable monthly
You must have 6 months on interest payments available, in your bank account before we loan = $2625 in your checking account.

Your numbers;

Sell for $50,000
Commissions 6% = $3000
Holding, closing costs = $1500
Points on HML = $1400
Interest on 5 month hold = $2187.00
Purchase price at $30,000
Re hab costs $7000
Total costs $45,087
Net profit is $4913 = NOT ENOUGH!

Your offer would have to be $25,000 or less for this to work using hard money and you need $2625 in your account to qualify!
Most hard money guys won't lend on as little as $50,000. That may be a problem.

Maybe you could get it for $25,000 and wholesale it for a quick $2500 or so?

Hope this helps,

Michael Mangham
MD Home Acquisitions LLC

Mike, thank you very much for the info... It helped very much, as well as sparked a couple of other questions & numbers... First, The market value on the house (according to Zillow) is right around $60K... So would the ARV be higher than this $60K estimate...?? These numbers you have used... are they actual numbers/percentages for CO... You listed comissions... is this my RE agent comissions...?? and last, how does a person go about figuring holding/closing costs of the deal...?? Again, Mike.. Thank you VERY much for your info & knowledge on this deal...

P.S.
The HML places I have researched, were based here in CO... 2 of them told me they don't really like to invest where I am, and the other(s) have not got back to me, so I assumed they weren't interested.... Are you or your company here in CO...??

Jack, my realtor didn't really show me any kind of comps on her estimate of selling this deal.... what kind of comps should I ask her to show..?? To do the repairs, I have an independent contractor I know, who does all aspects of construction, however, the only repairs this house needs are simple cosmetic repairs, and landscaping... this $7K is both mine and my repairmans estimate.... I don't really have the money, and definately need an HML... however, if what Mike told me a little way down.. (about having 6 months interest payments available in my bank account), I can probably come up with it... Thanks Jack for your help on this as well... It is definately appreciated...

to save yourself this type of problem in the future, simply build an Excel spreadsheet using the information laid out by michaelmangham (#3 above) and then you can input numbers quickly and get a quick answer by the numbers.

Let me answer your questions in the order you asked.

1. NEVER base your offer or your selling price (ARV) on a website! You need to get actual sold comps that are actually comps for your property. This will tell you what properties like yours are actually SELLING for. Then you should look at comps that are currently listed (for sale) in your area. This will tell you what current (today!) pricing is and what you will be competing with when you list your house for sale. Also check Average days on market on all your comps. Finally check currently under contract comps to really see what houses are SELLING for today, not 4 months ago. This is critical in this market. Sold comps from 6 months ago may have sold for more than they are selling for today.
Websites can not and do not tell you things that can effect the ARV of your property. Things like the neighbor is a junk collector. The liquor store is on the corner. The street behind the house is noisy. You must know your area!

2. The commissions are for the buyer and the sellers agent. I listed it a 6%. This is standard, but like all things in real estate they can be negotiated.

3. Holding costs can be figured monthly. Insurance, utilities, Money costs, lawn cutting, staging costs. They average about 3% of ARV but can vary widely. Closing costs can be determined with a call to your title company.

4. Yes, I work the Denver area and the surrounding areas.

Michael Mangham
MD Home Acquisitions LLC

Eric,

I think that buying this deal with HML is a bit over your head... you probably would be better off either borrowing money from family or friends to purchase it and paying them once you sell it(view story/video of Chad Merrihew on how he started) or try to assign the property to another investor (you'll have to make a lower offer than what you're thinking of-read Indiana Joe's posts/videos to learn how low his offers are.

That's great that you're taking action, but you have to make sure that you do your due dilligence on every transaction, especially your first one!

Wishing you success,

Valerie

Hey Mike.... referring back to this info you gave me on my problem: I had a couple of other questions, being that this house is still open, and they just dropped the price from 40K to $34,900... I think I will put in an offer for 27K. I also have refigured the rehab amount to 5K... Does this offer sound a little more feasible..?? also Mike,.. Being that you & your company are based here in CO... Would this be something you might be interested in...?? I desperately need someone to help me out with the funding on this deal, as I have asked everyone I know, and tried short selling it... but, unfortunately no luck at all... I know, after getting this first deal under my belt, will assist me in being more and more successful in this RE investing career... Thanks for all your help/expertise on this Mike, it is VERY much appreciated...

Eric,
P.S. I do have a very reputable real estate agent, who would gladly talk with you about this deal, and who will be with me from buying this house, until it is sold...