Found my First Deal....Now I need HELP! :-) - Posted by Fran (CA)

Real Estate Investing
#1

Posted by Fran (CA) on February 01, 2001 at 18:15:35:

Hi Stacy,

Actually, I remembered that from the wrong post. It was Jim P. and he sent it to me via email. This was what he said: “To make this one simple your max offer is 70% of after repaired value, less whatever the repairs total. Your ballpark number on repairs for a house built in 1964 are $15/sf”.

I am not sure where he gets the numbers, but he does work with a lot of foreclosures.

Hope this clears up the misunderstanding. I promise not to do anymore posts really late at night. :slight_smile:

Fran

#2

Found my First Deal…Now I need HELP! :slight_smile: - Posted by Fran (CA)

Posted by Fran (CA) on January 31, 2001 at 20:11:37:

I can’t believe I found a rehaber in our area. I was so shocked. It is listed with a realtor, but here are the specifics:

Built: 1964
Owner passed away last year and house is held in trust. House is also vacant.
Listed: 470K (realtor said they are thinking of lowering to 440K)
FMV: 525K (could go higher)
Repairs: 10,640 (termite and fungus damage in crawl space under the house, will have to tent house for termites)
Additional repairs to get it marketable: Upgrade kitchen (has original stove, sink, etc.), baths (some work to be done for fungus damage to flooring in above estimate), flooring throughout (hard wood floor throughout with carpet over in some areas), repaint interior (exterior needs a couple of minor fixes). Estimate 20K
Roof: 3-4 years new

420K would be 80% of FMV
367K would be 70% of FMV

So what would be a good offer? What would a hard money lender give me? I would need to have the cost of repairs included in the loan. Would I be able to get a loan for 400 - 450K and still make money on the deal if I sell it in three months? I could probably sell it in under 30 days completely fixed up. Another house with same floor plan sold for 600K last month. Since the house is in a trust, is there anything that I can do to do the repairs and then sell it giving the trust the money after the sale? Last question, does anyone know any hard money lenders in San Francisco Area?

I think that is all the help I need for now. :slight_smile: I am sure I will need more.

Thank you everyone for your help!

Fran

#3

First Thing I’d Do … - Posted by Rick Wheat

Posted by Rick Wheat on February 01, 2001 at 08:27:34:

is to find out if the sellers are willing to work with you on some Owner Carry-back financing. If there’s a mortgage of much consequence on the property, they probably won’t consider it, but you never know.

However, if the property has no mortgage on it, you may be able to structure some SUPER TERMS on the house, that would get the sellers their money and give you a good opportunity to make some as well.

GOOD LUCK!!!

Rick Wheat
rick@rwcproperties.com

p. s. - If you have any questions on how to structure a couple of Owner Financing offers, get with me.

#4

Be CONSERVATIVE - Posted by SueC

Posted by SueC on February 01, 2001 at 08:08:42:

Keep in mind you should really get a professional estimate(s) of the work needed. I’d add 10% onto that for the unforseen. (Only $20K to update kit-bath etc. seems way low to me, esp, in the SF area.) And what profit are you looking for? I’d set it at 15% minimum. Also, you haven’t factored in any holding costs - what if you had to pay a hard money loan (they’re EXPENSIVE) for two or three months while work is being done and then had to carry property for another 2-3 mos while it’s being sold? Even if you get it under contract to a buyer right away, they may not be able to close for 60 days. You can never be too sure.

Try to START your figuring at 70% of FMV then subtract holding costs (your monthly PITI) plus fixup costs, and that should be your offer.

Note that they appear to be willing to drop their price $35K just because you LOOKED at the property, so think WAY LOWER. A quick story: My parents looked at a home that needed very little work, bank owned, sitting for 1 year, new desireable golf course community. Bank was asking market price - $465K. They told bank the most $ they had was $350. The bank came back with a counter offer of $395 (!) - and they all agreed on $365 in the end. There truly was only about $10K in fixup costs - some scratched paint and deck repair. So start with the offer that is so low it makes you embarassed! (Fortunately for my father - and unfortunately for my mother - NOTHING embarasses him - except not to get a DEAL)

#5

Super Terms - Posted by Fran (CA)

Posted by Fran (CA) on February 02, 2001 at 10:15:49:

Hi Rick,

To give you some more background information on this house, it is held in a trust account at this time. The previous owner passed away last year. There is no money owed on it except for inspections that the people on the trust have put in an escrow account. I would like to know how I can structure some SUPER TERMS on this property. There are 7 people involved in the trust account. Would I have to get all of their consent to do an owner financing deal?

Thank you in advance for your help!

Fran

#6

Re: Be CONSERVATIVE - Posted by Fran (CA)

Posted by Fran (CA) on February 01, 2001 at 11:34:22:

Thank you Sue for the information. I was just trying to ballpark without getting estimates. I am going to get estimates today. Rick gave me a great suggestion for figuring out estimated repairs and I am going to see if matches with the estimates I will get.

I think I will take your father’s role and not be embarrassed to ask for too little.

Thank you,

Fran

#7

Re: Be CONSERVATIVE - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 01, 2001 at 13:15:37:

What was Rick’s suggestion for estimating repair expense?