Posted by RichV(FL) on June 30, 2003 at 08:18:50:
Dee,
Great post and very true. I made some of those same mistakes myself when I was just getting started.
Now when I look at a rehab property I run those numbers and see what I can come up with.
Regards,
RichV(FL)
Did these Would-Be Rehabers pay to much? - Posted by brian(md)
Posted by brian(md) on June 29, 2003 at 21:35:04:
I got a call from one of my bandit signs. Guy and his “partner” need to get out of a house. They bought it back in Aug 2001 for $63k. That’s what dataquick says. It was a “fixer-upper” and they intended to rehab it.
TODAY, two years later in a hot market, the comps for that area are averaging 100k.
I havn’t seen the house, but apparently they ripped everything out. So it’s a total rehab project now.
Things fell through. He and his “partner” have now gone sperate ways and need to be rid of the house.
My contractor and I are going to go over there this week to do the walk though and get estimates.
Me? I’m wiling to pay 65% - costs of repairs - other expenses.
That’s going to be a lot lower than what they owe. Looks like a short sale or no sale situation.
Anyone think these guys paid to much when they went in together on this project? Any suggestions that I should consider so I don’t get burned here?
Re: Did these Would-Be Rehabers pay to much? - Posted by Ron (MD)
Posted by Ron (MD) on June 30, 2003 at 07:34:12:
Brian,
It could be that the original sale price included cash back to the buyers for repairs, making the true sale price something lower. Also, if the buyers were a couple of investor/partners, they may have paid cash, so there may be no loan on it. Could be you could buy it below their sale price without having to do a short sale.
You said that you would offer “65% - costs of repairs - other expenses”. I don’t know what you call “other expenses”, but many rehabbers will pay 70% minus the cost of repairs. This may not be a problem if you are dealing one on one with the sellers, but if you are competing against other investors (e.g., on listed properties), your formula might price you below the market.
But, as Dee said, no one says that you have to pay what any particular seller (or other investors) set as the price…it might just mean you don’t get as many deals.
Ron Guy
Re: Did these Would-Be Rehabers pay to much? - Posted by Dee-Texas
Posted by Dee-Texas on June 30, 2003 at 07:11:52:
One of my big mistakes when I first started was to second guess the other party. What YOU would do or what YOU would pay, has nothing to do with the situation until the money is coming from your pocket.
Sometimes someone elses deal isn’t a deal for them but a good one for you.
If the house is worth that much and they haven’t totally destroyed the property it still might be a deal. The key is…you don’t know until you see it and run the figures. The deal might be one that you want yourself, or one that you need a partner (contractor friend), or money parter…OR…walk away.
Great $uccess,
Dee-Texas
thanks for the advice - Posted by Brian(MD)
Posted by Brian(MD) on June 30, 2003 at 07:59:46:
I know I might be getting fewer deals due to the low offers, but at this point, I can’t afford to make a price mistake. Still looking for my first wholesale deal, I have to have a dead-sure opportunity for my end-rehab buyer. Until I have more cash reserves, I am willing to take fewer deals.
Thank you for all the other info you shared.