If you offer seller financing, you can add another 5k to the sale price. I offer owner financing in my ad in the paper. I interview on the phone. Ask them why they want owner financing. What problems they have. How long ago were the problems. Are they resolved yet. I am finding that most buyers “think” their credit stinks. When I find someone who isn’t that bad, but they think they are, I show them the house and get a signed offer from them. Then I take them to my broker. Most times, if I have done my interviews well, they will finance right there on the spot, and I have just made an extra 5k ! Sometimes I am giving them 6 months or a year on a L/O, if they just need a little time to finish fixing some problems. But I know that going in to the L/O. I also get 3k down as option money from them at the time we sign the option. So, IF they don’t repair their credit problems, I add 3k to my profit, reduce my holding costs, and sell the house again. It’s much nicer to have a cash buyer right off the bat, but those darned cash buyers can be more difficult to deal with.
I have a house I bought last May. I really planned to just sell right out of the house. I put on a new roof, carpeted it, added ceiling fans, and gutted the bathroom. Paid 40k, rehab 4k. Lady L/O’d it. Put down 2500.00. 7 months later she walked from the deal and “asked” to be let out of her lease. She forfeited her 2500.00 (Bill Bronchick’s forms) I found a new buyer. 5k down, and he is approved for a loan in 3 months. oooohhh almost forgot. I sold it to him for 5k more than her ! Sale price is 59,900, and I am giving him a 2500.00 allowance for a new furnace.
So, that’s how I make more money on my rehabs. Patience is the key factor.
I looked at a sfr with 3 brs, liv rm, din rm, kitch, 1ba, den, 1 car garage yesterday and the owners are asking 15k for the house. It is owned free/clear,taxes are 1200 comps 40-50k, don’t want to be landlords, urban area (no war zone). Needs new roof, sq footage 62’30’ needs new furnace, new ceiling due to water damage, some walls need sheet rocking, painting, new lanolium on kitchen,bath and dining room, new carpeting throughout house.
I am wondering if this is a good deal factoring in all repairs needed,plus holding cost. The ARV will be $50-53k
50,000
-15,000 selling price
3,000 holding cost
-20,000 fix up
38,000
I would like to flip it to another investor for 10k and let them worry about the fix up.
Is this a deal. I am meeting the owner today to sign the contract.
Posted by d.henderson on May 25, 2000 at 07:55:25:
Everyone has given you excellent advice, the only thing that I can add is this:
If you are going to rehab and the house has been sitting for a while. I would go back to them and offer a lower price Cash, close in 1 week, if you can get paper work done that fast. Wave some money at them If it’s been on the market for long…who else is going to solve their problem with a total loss (as they see it)
Go get em’
Dee-Texas
I would do it. It’s just about exactly what I do every day. My husband quit asking what needs done to the the houses I buy, because he knows already… roof, kitchen, bath, furnace LOL He says, “did you buy another piece of crap today?” hehehe I just say “why yes, honey, I did !”
But really, this is a BIG job and it can be overwhelming to take on a rehab of this size. Make sure you are not under-capitalized, and be prepared to offer some sort of owner financing such as a L/O, if the market gets soft. I always make sure that rental prices will still make me a profit after the rehab is done. That way, I have all the choices and don’t find myself with my back up against the wall HAVING to make the sale.
I would suggest starting with a smaller rehab job, but you will make money on this one if your retail prices are correct.
As an investor I want to make a profit on something I buy. For the use of my time, money and the risk I want to make 10-15K on this deal. If I can not make that I would not buy it from you. Most investors would want the same potential profit.
An alternative is to do enough to sell more to a retail buyer at a slight discount. However from what you say the roof and furnance can cost a lot an not improve its saleability. Another alternative is to use some hard money and rehab it yourself. So you sell to me and do nothing for about 1K or you do it yourself for 12K. The lower you can purchace the more you can make.
Thank you so much Laure for your gold nuggets. To answer your question, the foundation is pretty good, it is a very sturdy house.
The problem that the owners had was renting the house out to a tenant who never informed them of the problems,i.e roof leaking. The only way they found out about the problems is when they evicted the tenant and then went into the house. Wow, what a surprise to them. Needless to say the house was in pretty good condition and on market for 28k prior to the tenant issue. I moved on this quickly because I knew this was a good deal. After I located the house I sent a contract to the owners with protective clauses. The owners where not ready to show it to me due to the fact they where in the process of evicting the tenant and cleaning it out. That was three weeks ago and now I was able to view the house Tuesday aternoon and sign the contract. Now What!!!
I have called a couple of the investors in my data base and yes one in particular stated the house needs about 27k worth of work and he will be willing to offer a finders fee to me for $500 ooooook. Hey I’m in the business to make money also. That may be o.k for someone else, but not I, I have my eyes focused in on bigger profits. Plus I know the game, blow up the repair cost and really costing about 1/2 of your qouted estimate. Needless to say, I have uncles who are in the contracting business so I will get estimates from them and other contractors just to get a figure. I do not want to rehab this house myself. If I could sell it retail and get the buyer set up with the network of brokers I have then I believe I can get this deal done asap.
Sorry for the long post. Gotta go and make some calls.
