Posted by Joe Kaiser on February 23, 1999 at 07:11:49:
Tracy, it costs money to close. In my marketplace we figure 10% for a seller. Double closes cost, well, double.
Do the math here and it gets pretty skinny.
If you’re paying $59 and it takes another more fix up dough and now you’re into it $65, there’s little opportunity to make a profit here.
Joe
flip, handyman, or neither - Posted by Tracy
Posted by Tracy on February 23, 1999 at 24:29:07:
I have found a HUD foreclosure through a realtor which we are hoping to get for about $59,000. It has a $2,600 carpet/paint allowance. I think that $4-5K, in addition to the $2600, would make the place look great, although I don’t plan on doing the work myself. I am confident that the house would sell, after fix up, in the mid to lower 70’s.
Assuming that we were to get this house, we would have 60 days to come up with financing once our offer is accepted.
Considering all this, would the best option be to flip it to an investor, try to sell it as a handyman special and do a double close, or pass and look for something with a larger profit?
Thanks,
Tracy
Re: flip, handyman, or neither - Posted by Bud Branstetter
Posted by Bud Branstetter on February 23, 1999 at 10:51:45:
Tracy,
Most investors are a greedy bunch. They want 10-15K profit to put out that 59K, do fixup, market the property and wait for the buyer. So flipping it to an investor is not as likely.
Handymen specials work but take a certain amount of time. Most buyers want things ready to move in so you have to find just the right person. Finding that person in time to do a double closing isn’t likely either. The HUD properties in most parts of the country are not good deals for investors unless it needs quite a bit of repair, is uninsured and goes on the extended list.
Re: flip, handyman, or neither - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on February 23, 1999 at 07:16:31:
You understand that the $2600 allowance only applies to owner occupants. If you do not intend on occupying the property, HUD will not give you the $2600. You didn’t mention the HUD list price, but I hope it is more than the $59,000 you are bidding. A quick rule of thumb on HUDs is to take the list price minus the repair allowance, multiply that number by .80, then add in the real estate commission (I use 3%). It is my understanding that this is the minimum that HUD will accept on a bid. If your bid is accepted, you will have to close on the property yourself. You cannot assign a HUD contract. Also, HUD has become rather nasty lately about keeping the earnest money deposits. Just because the buyer cannot secure financing is no longer a good enough reason for HUD to refund the earnest money.
Also, the profit margin seems pretty thin. Per your numbers : Purchase is 59,000, repairs of 7600, total cost to you of 66,600. If the property sells at 73,000, your profit would only be 6400. That’s pretty small for the amount of time and energy needed to do this.
Just my opinion.