Posted by Scott Az on February 11, 2001 at 19:57:51:
Thanks ben for the advice I havent thought of that.
Pretty hosue deal, A really pretty house! - Posted by Scott Az
Posted by Scott Az on February 11, 2001 at 10:56:44:
Hi to all,
I’m looking for advice on flipping a house in phoenix area. The house is for sale for 2.9 million dollars owners says the house is appraised for 4.0 million last year. My question is how can I pull this deal off? Is it possible to get the owner to drop to 2.6/2.7 million? If the owners offical appraial is actually four nillion dollars, how can I make a quick buck and get out? Hey legrand said to look at pretty houses! Everyone please through in your two cents! Daddy needs a new pair of shoes!
Re: Pretty hosue deal, A really pretty house! - Posted by JohnBoy
Posted by JohnBoy on February 11, 2001 at 16:19:08:
I posted this on the finance site but I’ll post it again here to see if someone here has any thoughts on this.
I seriously doubt that you would find a buyer to pay full market value for this property, especially in 60 - 90 days! Homes in this price bracket sell well below market value all the time. Paying $3M on a $4m property isn’t uncommon. That’s usually what it takes just to get the thing sold!
Think about it. If YOU had this kind of money to spend on home like this, would YOU buy one that was designed and built for someone else, OR, would YOU rather have your home custom built to your specifications??? That’s a LOT of money to just pluck down on someone elses dream home! In order to get this thing sold you will need to offer it well below market value. The only thing you would have going in your favor to unload something like this will be LUCK! You just happened to be in the right place at the right time, where the right buyer just happened along while you had the thing tied up and they just absolutely WANTED this house! In this price bracket with the number buyers qualified to buy a home like this, how realistic will that be??? It will all boil down to getting LUCKY! So you will be risking the marketing costs involved in hopes of getting lucky with finding a buyer. My guess is that you would get better odds at the crap table in vegas on one roll of the dice shooting for box cars at 30 to 1. That’s just my opinion.
Also, what is it with creating a note to sell at closing to get this deal financed??? Trust me! If you can find someone that can afford to buy a home in this price bracket, selling a note at closing will be the least of your problem. If you could find a note buyer willing to buy the note at closing on this, then the buyer could probably walk into just about any bank and get their own financing! Just because you want to sell a note at closing doesn’t make getting the buyer financed any easier. In fact, in most cases it will be harder and a lot more hoops to jump through than just getting a loan through a bank!
If you were to get this property for $2.5M, then think in terms of dumping it for $2.7M - $3m just to get a fast sale and walk away with a few hundred grand for your troubles! Your talking about flipping a high end property for retail! That means offer it well below market value just to attract a retail buyer and let then know they are getting a deal on this to help them decide this is a good deal for them!
Also remember, you stated before the seller has been trying now for three months to sell this. You can be sure this seller has plenty of contacts with people in the income brackets that could afford a home like this and has already tried to find someone in his area that could afford this, especiall being located on a country club! This means you will probably need to advertise this thing in major papers in major cities across the country to lure a buyer in for this. Being located on a country club in AZ. would be an advantage for doing this to attract high income players in other cities looking for something like this in a nice climate like AZ. But to advertise it in all the major cities will cost some dough! You could try the USA Today that is a national publication.
All in all, just remember, you’re betting on the come here to get a buyer in this price bracket and with those being far and few between, your gambling with your advertising costs hoping to get LUCKY and risking your dollars to pull it off! If you can afford the gamble to take a shot at this to reap the reward of possibly making a few hundred thou., then go for it!
Re: Pretty hosue deal, A really pretty house! - Posted by Charles Steed
Posted by Charles Steed on February 11, 2001 at 14:46:08:
Admire your big thinking. One way to work this might be to tie up the property with a straight option. If the seller balks at taking his property off the market, tell him he can continue to market it while you do the same. That might work.
Having said that, I have another suggestion. I wise person once told me to drill where the oil is, to fish where the fish are. In real estate this means to concentrate you efforts in houses that the majority of buyers can afford, especially if you are just starting. Compared to the basic 3 bed, 1 1/2 ba, on a typical city lot (where you’ll find the most sellers and byers), million dollar+ homes present huge challenges for aspiring investors. That’s not to say it can’t be done, and my hat’s off to you for even considering it. For now, I suggest you concentrate on drilling where the oil is abundant. BTW, this is one bit of advice where I won’t mind being wrong. Best Wises.
Few issues… - Posted by KennS
Posted by KennS on February 11, 2001 at 11:41:52:
Appraised at 4m doesn’t really matter. What matters is true market value and marketability.
Here is what I would be looking at:
- Is this a for sale by owner? or is it listed?
- How long has it been for sale?
- Why is the owner selling and what is motivating him/her?
- What is the worst case scenerio for me and the seller?
- What are my holding and marketing costs? How and where do I find a buyer for a 3-4m property?
- What is your previous experience with multi-million dollar SFRs?
- If everything goes down the toilet, is this a property you can keep as your personal residence?
- How about the other properties near by? What is the price range? How long were they on the market?
- How does the economy affect the sale of this property?
Answer these questions and you should be a little closer to your solution. As you may already know, it is a whole different ball game in properties of this value. I believe the median house price in Phoenix is about 115k. I also believe that because of the economy and the stock market, there is probably not a “new” or growing pool of buyers for this property at this time.
Good luck
- Kenn
Re: Pretty hosue deal, A really pretty house! - Posted by Scott AZ
Posted by Scott AZ on February 11, 2001 at 15:15:33:
Thanks Charles, I know its big thinking but hey just for heck of it I wanted to run some numbers and see what was possible. Cant blame a investor for trying huh? I’m trying to get myself thinking straight and I dont want to be afraid of big numbers, maybe if I pull this off it’ll like baptisim by fire, the hotter the fire the stronger the steel.
Thanks for the advice
Scott Az
reply to few issues… - Posted by Scott Az
Posted by Scott Az on February 11, 2001 at 12:02:22:
KennS
Thanks for the reply,
The home is for sale by owner.
I believe its been for sale for over three months.
I dont know why the owner is selling.
Worst case scenario is I loose everthing, I could never pay for a home like this with my present income.
My holding cost are overwhelming im think some where around 15,000\20,000 per month, I have no idead where to find a buyer.
I have no experience with multi million dollars deals.
The price range from nearby properties range from 800,000 to 6,000,000 dollars
The economy in the phoenix area remains strong and housing is still booming. obviously finding a buyer would be difficult, any ideas?
Re: reply to few issues… - Posted by Nate
Posted by Nate on February 11, 2001 at 12:36:18:
I think you just answered your own question about whether or not to proceed, with the following statements:
Worst case scenario is I loose everthing
My holding cost are overwhelming
I have no idead where to find a buyer.
I have no experience with multi million dollars deals.
Does not sound like a good idea to me!
Re: reply to few issues… - Posted by Scott Az
Posted by Scott Az on February 11, 2001 at 13:00:33:
thanks for the reply nate, I’m just thinking big, thinking outside the rules to see whats possible.
Heres what I was thinking… - Posted by Scott Az.
Posted by Scott Az. on February 11, 2001 at 13:38:52:
I was thinking of putting the home under contract for 30-60 days at a price of approximately 2.5 million. I would create owner fianancing and then sell the note at the closing table I believe I could find a note buyer that would lend 80% loan to value. 80% of 4.0 million is 3.2 million. Which is more then enough to cover my offer of 2.5 million. That would leave me with a profit of $700,000 at closing minus misc. cost. I would then carry a 2nd mortgage on the remaining balance of $800,000 over 15 years @6% which would produce app. $6500.00 per month. Just one idea? Any problems with that plan?
Re: Heres what I was thinking… - Posted by JohnE
Posted by JohnE on February 11, 2001 at 14:04:56:
Scott
I don’t think you will find a note buyer that will buy a 3.2 m note when the buyer of the house has no money in the transaction. Try this:
Get a option to purchase at $2.5m
Market it at $4.0m with owner fin.
Get 20% down at $800,000
sell $3.2m note to note buyer for around $2.7m
you make $200k. less closing costs.
As for fnding a buyer try the local pro baseball and basketball teams, lawyers, doctors, etc.
JohnE
Thanks for the idea. Maybe this possible? - Posted by Scott Az
Posted by Scott Az on February 11, 2001 at 14:15:31:
Hey john thanks for the response, finding a buyer is gonna be the hardest part. I’m just looking at the possibility of doing deals like these. Your input is appreciated.
thanks
Heres some more details to those of you interested.
Gothic mediterranean mansion. 10 bedroom, 9 bathrooms, over 15,000 feet of living space including guest house and maids quarters. On prominate golf course, eight car garage, Seller will fianance. Any more ideas out there? thanks in advance.
Try Robb Report magazine… - Posted by Ben (NJ)
Posted by Ben (NJ) on February 11, 2001 at 17:56:16:
I think the real estate portion is now called “Showcase”. These magazines cater to very affluent buyers. The only problem is there is a lag time in publication, in other words an ad placed now
may not actually appear for a month or two.