Upcoming Meeting with Homeowner

[Account Closed]

Good morning, Bigger Pockets family. Okay, here's the deal, I will be meeting with a home owner on Monday, 10/25/10, to discuss purchasing either 1 or 2 of her properties. One of the houses is in a serene and comfy neighborhood and the other is in an area not quite considered a war zone, but not too far off from that label either. The properties are not mortgage-laden, but the owner is having difficulty staying on top of taxes on one of her properties. What types of questions should I present her with when I meet with her besides price and repairs? I already know her motivation, and we've discussed some serious stuff during about a 10 minute phone conversation today.

Also, if you are, or if anyone knows of, a credible, hard-working contractor in the Mercer County, Nj area, please contact me.

A bit off topic here, please refer to a topic I've posted in the Real Estate Dealmaking: Make Deals, Find Partners, Mentors& BirdDogs, etc forum about a property for sale in Beverly, Nj if you're looking to invest in the South Jersey area.

Thanks!

Nicole

[Steve Babiak]

Originally posted by Dani Robison:

...

Here's how I figure the numbers on properties I assign

$70K ARV (using the number you suggested here)
minus $50K repairs
equals $20K (current value)
70% of $20K = $14,000 (this allows for 15% expenses and 15% profit margin for the investor)
If my fee was $5,000, I'd have to negotiate to buy it from the seller at $9,000 and then sell it to an investor for $14,000.

If the repair cost is less or ARV is more, or if you're willing to take less on your assignment fee - you can tweak the offer price.

That's just how I would run the numbers - ...

Wow, I think most people work the "70% formula" a bit differently - because the idea is to have a reasonable profit margin, and not a paltry margin.

So let's re-work those numbers to actually give the investor a chance to get the "15% expenses and 15% profit".

$70K ARV
70% of ARV = $49K

70% ARV minus repairs = $49K - $50K = OUCH, a negative number and probably a money loser.

You would have to be given this property and at least $1000 for this to fit the "70% formula". No profit to be seen from how I look at it without that type of offer... And those numbers did not even allow for a wholesale fee either.

This one sounds like a NEFF (Not Even For Free) house.