One thing to remember is negotiations is everything. You can’t ask her if 108K is the lowest she would take. Of course she’ll say no. One thing you should do is first find out what kind of deal you want to structure. Do you want to buy and hold for a rental, or buy and flip (which won’t work because you’re buying the house close to market value) or buy and then lease option it to another party. Then you want to find out how much it would cost to bring it to fair market value with the rest. Deduct that and the amount you want to make from the selling price. For example, say you want to sell it, you’d have to figure in what it would cost to fix. Say $3,000, and you’d also want to make $4000 on the sale, then you’ll factor in closing costs, and realtor’s commisions etc. You get the picture. You first need to figure out what you want to make on ANY deal and what your thresholds are, then you’ll have some idea what to offer at and at least you’ll know what a good deal is.
I’m looking into my first rei deal and would like some opinions wether or not there is a way to make money on this deal or to just walk.
The house is 47 years old, in a nice established neighborhood in New Orleans. It’s 1100sq.ft. living, 3Bd/1.5Bth, AC and Roof 10yrs. old. 1 car, detached, garage which includes a laundry room and small workshop area. Owner says she renovated 1 year ago, but I think she just put in a new gas line outside and copper pipe. Carpet is a year old, but house has not been lived in since she bought it. It needs some cosmetics outside, but nice otherwise.
Houses in the area are going for $100k-$115k. She is asking $108k. I asked if that was the lowest she would take. She said yes, but not very firm.
If there is a way to make money on this, please tell me which method to choose. TIA!
Posted by Roger (WA) on October 20, 2003 at 18:23:58:
The first reply was right. This is too tight to consider flipping. After closing cost and taxes there will be nothing left. The best way to make money on this is over time as a rental, as long as it is a nice home in a nice area surrounded by equal or greater value homes.
You just need to work the numbers at a given price (lets say at the asking price of $108k) and make sure after all closing cost you will come out ahead.
If you don?t know what all the closing cost will be then go to a title company and run the numbers by them. They are always happy to help people with this. If they aren?t, go find another title company to work with.
If the numbers work out and the rentals in this area are going for the amount you will need to get a positive cash flow, then write an offer to the seller for say the full amount or maybe even a little less BUT, ask for lets say $3,000 to go towards your closing cost. This will make the seller feel they are getting their asking price and it will be a big help to you to get $3,000 to help pay your closing cost and it will be deducted from the sellers proceeds.
If the seller comes back with a counter offer, you will need to re-evaluate it at that point. If you get a counter offer or have additional questions, then email me and I?ll be glad to offer whatever help I can.
Roger