Turn key deal?

Question

Hello I have property Im looking at the offer is 52k and the renters are long term tenants that pay 900 monthly. No repairs needed. The owner is asking for 2k to go to the title company and he will give me 4 months to  wholesale the house to an investor. So what do you all think deal or no deal?

John Kent · Answer

This is how listings happen. On the surface there is nothing special about the numbers that you presented. It appears to be close to be a close to retail deal and perhaps under-performing for a rental in the area.

If you plan on taking a profit out of the spread your buyer won't get $52k pricing. If you do something silly and tell the seller you will pay all the closing costs that will reduce the attractiveness of the deal to the buyer even more. Furthermore, If the market rent is $1100 and not the $900 that is currently being collected than other properties, even if they are a few thousand dollars more, will be more attractive if they are pulling market rent.

Curry Forrer · Answer

Thanks Brent the reason why my cash investors don't have access to 52k pricing is because this is not a listing this a deal that just formed between the seller and I through networking.

Brent Coombs · Answer

@Curry Forrer, if Comps are from $56k, why would your cash Buyers pay you $52k the Seller will take (plus your fee), when they can just buy at the same price any day of the week through normal listings? Once your Buyers cotton on to your deals not being cheaper than they might get from any Agent, you're out!

Mind you, on the surface of it, those numbers don't sound too bad for buys-to-hold. Ever considered doing THAT? Cheers...

Curry Forrer · Answer

Thank You Kent and Jay This info is very helpful. I will run the numbers on market value and repost. The comps are pretty close to the condtion of the property both sold and for sale. The owner wants to cash in on the property to work on another deal in th area he is wanting to get into. He bought the property back in 2009 for 25k put 15k into rehab and has been renting it since. If I put the home under contract my plan was to market it to my cash investors that buy and hold and knowing what I know from you all guess I wont market to the public i.e craigslist etc. I will check with the title company and Florida reals estate association to see where this type issue falls.Thanks again..

John Kent · Answer

@Curry Forrer for a rental property you would also need some measure of return. Income vs expenses. A cap rate, IRR, or cash on cash return. Items like HOA and Flood insurance can kill a rental deal quickly.

Are those comps the same condition as the property in question? If they are in retail condition and the subject is in rental condition then a downward adjustment is needed. The numbers are close enough for this to be a market value deal. The rental rate for this property is $900.  What is the expected market value?

Sounds like it would be a pretty good buy an hold deal. Why is he selling it? No way to hold it? Perhaps find a money partner?

@Jay Hinrichs if he goes under contract and sends the information out to his private list that is one thing. Marketing the property publicly is requires both a brokers license (not a salespersons license but a brokers license) and written permission from the titleholders of the property to market the property for sale. Advertising a property that you do not own for sale in a public forum is brokering in FL.

Some people on here are telling every investor to get licensed. I personally believe this is unnecessary. There are enough bad real estate licensees running around we don't need more. There are ways to do the business without risk of breaking the laws and investors should learn how to operate their business accordingly.

People get into wholesaling because they think it is a cheap and simple way to get started, until they figure out that it is rarely cheap and definitely not simple.

Jay Hinrichs · Answer

@John Kent  John do you think that this person can go into contract and then market this on craigs list his website etc without owning it.. do you believe that is legal in fla ? Or do you believe he needs to be a licensed realtor  this is a big questions these days in fla

From what I understand many realtors are getting pretty pissed with wholesalers and turning them into the FLA RE commission and they RE commission is taking action against this unlicensed activity .. do you feel this is happening or just hyperbole

Curry Forrer · Answer

Ok so what other info would need to be stated to get a useful answer? Comps are priced between 56k-65k rents are from 900-1100 in the area.

John Kent · Answer

@Curry Forrer there isn't enough information in your question to give you a useful answer.

There are more parts to a wholesale deal then what you have listed.

Curry Forrer · Answer

Thanks Jay I will make sure I am operating with in the state laws.