Is there any way to make this deal wok?

Question

I have the opportunity to purchase, from a family member, a home for $90k that requires roughly $30-40k in repairs and has an ARV of $240k, as a conservative estimate.

I have no credit, no income, and could only put down $5k.  Is there any way, aside from owner financing, to make this work?

Glenn Espinosa · Answer

Why in the world would you pass this up?! If his numbers are right then this will be a great opportunity to get in the game. If he passes this deal up then I don't know what kind of deal he'd need in order to jump in.

I say wholesale it to an investor and then offer to help said investor during the rehab process. That will help you two fold: 1) put more cash in your pocket and 2) give you a great opportunity to network and learn more about the actual rehab process.

If not then you can always look for a hardmoney lender. Be prepared to pay high fees but this will probably put the most cash in your pocket. You can't be greedy when you have zero track record and with almost the equivalent of no skin in the game.

Before you do all that, though... check and double check your numbers. Get a CMA from a realtor using recent sales and go ahead and get some contractors out there and pay them for their bids on the project. That info will go a long way when looking for an investor to wholesale to.

Jon Klaus · Answer

You could wholesale it for a healthy fee.

Aaron Mazzrillo · Answer

Forget hard money. You have no money to do the rehab so the only thing you will end up doing is giving the property to the hard money lender when he forecloses.

Find an active investor in your market. Bring that person the deal and ask to partner on it. See if the investor will split it with you 50/50, 60/40, 70/30 whatever it takes. I'm sure someone would love to have this handed to them.

Dave C. · Answer

He needs to jump in, yes, but this is a big one.  The fact that he has an opportunity to get a sweet deal doesn't create passion or the will to sustain hits.  If he can make something happen out of a wholesale deal or something, and he knows its a done deal, then sure.  He wants to take on the purchase and renovation of it, and he is a rookie and isn't well capitalized, so doesn't make me feel warm and fuzzy.

Glenn Espinosa · Answer

Dave,

I totally understand where you are coming from. The point Im trying to make is that if he is not willing to take the risks associated with real estate then he doesn't need to be in this business. The numbers he laid out to me (ASSUMING they are right) are, to me at least, all I would need to green light this deal. In my market that deal would be a home run. Im going to be conservative here:

235k ARV - 50k (20%+ quiet costs) - 60k rehab - 100k purchase = 25k profit potential

Also, I would beg to differ than it takes experience to be confident. Im sure many rehabbers have jumped into their first flip feeling confident without having ANY experience. As long as you are SURE your numbers are good and that you have done your due diligence, first timers can come into a deal with some sort of confidence.

I jumped into my first deal with only a month of studying and researching because I was 100% confident in the numbers I came up with. Did I make a lot of costly mistakes? SURE! But my numbers had enough room to allow for those mistakes and in the end I profited!

Simply put, if someone takes the time to do their due diligence on a deal and still does not take advantage of the opportunity that has fallen into their lap then they will never pull the trigger and forever be in the sidelines. Find something else, real estate is simply not for that person.

Wholesale it, do as Aaron suggested and find a partner, do something. Don't let this opportunity pass.

Steve Babiak · Answer

I avoid deals involving family members - somebody always seems to resent that a profit was made.  Whether it be the seller, or the seller's children ...  And you get reminded by them at every family gathering ...

Account Closed · Answer

It's possible you could partner on the deal, but you would need to be able to bring something to the table.  5K is a start, but most are going to want to see some experience or expertise.

Perhaps you have friends, relatives and others that you have gotten to know that would be willing to lend private money or partner on the deal.

Dave C. · Answer

If you are a rookie, I'd pass.  That may be a tough one to cut your teeth on.

Bryan Hancock · Answer

You may be able to find some hard money to purchase and rehab  it too.  It will be tough with only $5k though.

Is there any way to make this deal wok?

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