Potential deal, need advice on approach

Flipper/Rehabber · Douglasville, GA · Member since 2016 · 83 posts · 63 votes

Hey BP,

Need a little advice. I'm BRAND NEW to Real Estate. A coworker of mine bought a home about 6 years ago for $30k from the bank and has been living in it since then. He stated he's been performing DIY projects on the home during that time period. The home is paid for outright. He estimates his home value to be circa $100k. I think it could POSSIBLY be more with professionally completed upgrades but haven't seen the property nor pulled any comps for the area yet. He is considering the possibility of selling, but I don't want to botch this potential deal.

Can anyone help or advise me in approaching this situation? What things should I gather in order to figure out the best potential profit margin for both of us (ie. Win-Win situation)? I hope that's the right question to ask.

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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
9y
....Are you a broker?
If not you can't sell someone's house for them for a profit.
Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
Kolodij Tax & Consulting
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Kyle Jones
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Flipper/Rehabber · Douglasville, GA · Member since 2016 · 83 posts · 63 votes
9y
No I'm not a broker. I was thinking of buying it from him, getting repairs done, then flipping it. Is that the wrong way to think about things? I'm still trying to figure this all out.
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Kevin Siedlecki
Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
9y
@Kyle Jones, I'm not sure about what you mean by "potential deal." I read it as if you were going to buy the house from your coworker, but @Natalie Kolodij reads it - with as much validity, I think - as meaning you want to sell the house for him. What exactly is the "deal" you are looking to make?
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Jassem A.
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
9y
Why not also buy a similar home for around 30k and then do professional upgrades? It is usually cheaper to buy from banks than from homeowners unless the home needs tons of work.
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Kyle Jones
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Flipper/Rehabber · Douglasville, GA · Member since 2016 · 83 posts · 63 votes
9y
Yea @Kevin Siedlecki I'm not sure if I worded it correctly. I'm still doing my best to learn this new language and convey the proper ideas. Thanks for being patient.
I'm trying to figure out a way to acquire the property from him to flip it or rent it out.....or if there is a better way to do things, I was basically asking for insight.
Not sure if I made that more clear or not.
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Kevin Siedlecki
Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
9y
@Kyle Jones - yes, that makes sense. Is there a reason he's not just putting it on the market? A couple thoughts:
The most fair thing to do would be to give him a price that takes into account what he would pay to hold onto it if he put it on the market. That includes 6% realtor commission, maybe a couple months of insurance and taxes. Then maybe put in a couple thousand more to your discount. Maybe 85-90k would be a good fair deal for him.
Is that a good deal for you? Not if your plan is to flip it. What would it rent for? What are the taxes, insurance, and other expenses? I wrote a blog post a while back explaining how to do an initial analysis of rentals. Take a look: https://www.biggerpockets.com/blogs/6815/45137-my-...
Hope that helps!
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Kyle Jones
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Flipper/Rehabber · Douglasville, GA · Member since 2016 · 83 posts · 63 votes
9y
Thanks @Kevin Siedlecki! I'll definitely read your blog. The rent in that area range from $700-$900/mo normally. I really appreciate you taking time with me. I'll do more research to see if this is beneficial.
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Kevin Siedlecki
Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
9y
@Kyle Jones - yeah anything that you're getting that little on is probably not going to be a great investment. On the low end, you'll barely cover mortgage, taxes, and insurance. On the high end, you'll come closer to covering all your expenses, but there is very little cash left, if any, at the end of the month. I would look for something more expensive that will generate more income. These cheap single families almost always end up losers in the long run. There's just not enough room in the numbers when gross rent for a whole structure is under $1000.
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Kyle Jones
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Flipper/Rehabber · Douglasville, GA · Member since 2016 · 83 posts · 63 votes
9y
Makes complete sense @Kevin Siedlecki. Thanks so much for your insight!
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