Cash offer on rental or flip

[Haley London]

Brand new investor!

I have cash to invest and found a house

that is bank owned and is in nice shape

except the cosmetic paint, possible bathroom

update, and the big expense a new roof.

It is a small bungalow 2/1 but everything seems

good (yes I would get inspection!).

QUESTION:  If I am making a cash offer is 

it ridiculous to offer a few thousand over

what the bank got it back for and start low?

I have the money to do the repairs and hold it,

but now I am just wondering if I should flip it.

I do have to wait 90 days.   I would be offering

$80,000 and based on comps that I see I could

probably sell it for $110,000 or $115,000

Rent would probably be about 900-1100

per month before ins, property taxes.

I am still learning all of this and 

I appreciate anyones advice!

[Mark Fedorov]

My suggestion is to largely ignore what the cost is to the bank, and think about the cost to you. Start with how much you can sell it for, after the renovations ($110), then subtract the cost of the renovations (sounds like ~$20K) subtract 5-7% of that for closing costs, assuming no RE agent, THEN, subtract the profit you want to make on the flip.... I would figure in the time this would all take, from submitting the contract to settling on the sold house.. so what 6 months with lots of luck and the wind behind you back... how much do you want to make for 6 months of work?  $20K??  

If so, you are at $65.5K as your max price, and your first offer should be 5-10% less than that so you have room to negotiate.

So you are offering $60K for a house that the bank for in liu of $76K mortgage.. keep in mind that some of the $76K in the bank value is late fees and penalties that they are willing to give up, so they might bite on this, however offering less than their value means more paperwork for the bank people.  Make the offer, stand firm, look for other properties, they are there..