where do I start. - Posted by Leonard


#1

Posted by Bud Branstetter on November 23, 1998 at 15:49:47:

The first order of business would be what does the owner want out of this. A lease option approach will not work if the seller does not want to wait for the cash. You want to try to negotiate as low a price as possible if it is all cash. Then you will have to have a ballpark figure of what it will take to fix up. Or even tear down and rebuild. Be looking for those individuals that would buy a rehab project. If the owner will delay getting the cash then terms have to be determined. Are we getting owner financing for some length of time? What would this particular house sell for after fixed up? How does it size compare to the surrounding properties? Call or visit the owner. Take a purchase contract with you. Ask some basic questions and then listen. Tell us what he says and we go from there.


#2

where do I start. - Posted by Leonard

Posted by Leonard on November 23, 1998 at 14:51:50:

i have been reading this site for the past couple of months just trying to get feel for the whole business. i’ve found a house in one of the most sought after neigborhoods in the bay area. unfortunately it is uninhabitable and in horrible condition and in need of a complete rehab. the owner owns the house free and clear and is considering selling the house. what are my options and where do i start?? ps. i would appreciate someone showing me the ropes on this one as i would be more than willing to do the legwork and split profits. lm


#3

Re: where do I start. - Posted by Alex

Posted by Alex on November 23, 1998 at 17:31:54:

I have to agree with Bud 100%. Be careful which steps you are taking when investing in real estate (so many new investors fail to realize the seriousness of it). Never jump without a life jacket! It’s better to miss a deal then loose money because you didn’t do your homework. :slight_smile: Since you are a beginner, this project might be alittle overwhelming for you. I am a rehabber. I deal with foreclosed properties (no HUDS), run down properties and I also deal with paper - buying and selling. I know many investors who are flippers, note investors and some who are like me rehabbers. This particuliar property that you mentioned sounds like it would need alot of rehab work. To see if you can handle this job get an estimate. Find out how much this project will cost before you invest in it. I would suggest you get 3 written estimates from local contractors. That should give you a feel if it’s worth it or not, take pics of the place, check at the courthouse that there aren’t any liens on the property. Then quickly do a p. contract to lock it in & then assign it to get out of it & let a local investor do the work. You’ll still get a profit from assigning the contract; less headaches. If you want to throw this one my way, I live on the eastern border. What state do you live in, what area are we talking about? Is it a foreclosed property or just run down? Why is he selling? These are some things that should be stirring in your mind before you invest. I hope this helped alittle or at least to get you thinking in another direction. Happy House Hunting!


#4

Re: where do I start. - Posted by Stacy (AZ)

Posted by Stacy (AZ) on November 23, 1998 at 15:02:37:

I highly recommend that you find-out if you can get the house for as close to 50% of the “after fixup” FMV as possible, and flip the contract to a rehabber. Your first deal should not (in my opinion) involve rehabbing yourself. Get your feet wet by doing a quick, profitable flip. Generally, the rehabber will need to see about $15k profit after rehab, so you have an idea what’s possible. This depends on the value of the house and the amount of rehab needed.

My quick advice. Post more details.

Stacy (AZ)


#5

Re: where do I start. - Posted by leonard

Posted by leonard on November 23, 1998 at 15:17:37:

thanks for the advice. i’ll post as much as i know about the house. first of all, the average selling price for a house in this particular area is in the mid 250,000 range. so i would imagine that the land alone has a substantial value. the house has two bedrooms and one bath and has a really nice backyard.
should i start with a l/o or some other means of tying up the property, or is that putting the cart before the appraisal horse. i feel rather clueless.


#6

Re: where do I start. - Posted by Stacy (AZ)

Posted by Stacy (AZ) on November 23, 1998 at 16:06:46:

  1. Determine true FMV after fix-up. Use a realtor to pull comps, including “time on the market”, “sold” properties, and “off-the market” for like properties. Some investor friendly realtors will do this for free, or for a lunch, etc. Or, you could try experian.com for $10, which gives you a pretty good idea of FMV.

  2. Walk through the property with someone who can help you quickly ball-park the rehab needed. You need to know how much it will cost to rehab the place. If you think you can estimate it, you could try it yourself.

  3. Call the I Buy Houses ads, attempting to find a rehabber that would be interested in the house. Don’t tell him where it is. Describe it and the work it needs, and determine if the rehabber can close quickly with cash. This is imperitive. The rehabber must be able to throw in the cash at closing, or you will be in a tight spot. You can also call remodelling companies to try to find an investor, or referrals from Investor Club meetings, etc.

  4. Once you know the investor’s (rehabber’s) parameters, and the cost of rehabbing, you can tell if there’s room for a deal. If the rehabber will only get into the deal if there’s $20K profit in it, subtract 20K from FMV, then subtract cost of rehab, then subtract what you need as profit, and you have close to what you’d have to buy the property for. Decide to make an offer or not. If so, make the offer to purchase via contract with an assignment clause included. Negotiate within your parameters. If it gets accepted, you have it locked-up for a time period. Get your investor involved, negotiate a sale price that’s profitable for you, and get a separate sale agreement signed with him in preparation for a double close, or just assign the original contract to him for an agreed-to fee.

There’s much more involved, but that’s a kind of brief synopsis. Hope it helps.

Stacy (AZ)