[Calc Review] Would you take this offer?

Question

Hey guys - looking to get into the wholesale game in order to start building up cash for a down payment on other investments. Found a property here in Jax, FL that is in a great location, just needs some love.

I'm wanting to get $4k out of the wholesale. Seller is asking for $69.9k

Based on the #s, do you think it's a good deal for the flipper? It could also be a great rental property too.

View report

*This link comes directly from our calculators,                  based on information input by the member who posted.

William Kelly · Answer

@Ian Cooperman This is a very interesting situation. I am not entirely positive on the best route to take with this scenario. The best approach I could recommend is to create a new thread with a detailed description of what is going on so that others will be able to see it. I am curious to see the best alternative to this as well!

William Kelly · Answer

@Ian Cooperman You're welcome! Another key point to put into perspective is although you do want to analyze the numbers on the deal and get the ball park estimates, you don't need to be EXACT. It is inevitably not your sole responsibility to be exact on the repair costs, it is the buyers. It is the buyers responsibility to do their own due diligence on the property in order to know that they are being covered. With that being said, you do want to be in the general ball park which it sounds like you already are by having a licensed contractor walk through the house and give his repair estimates. And remember you can always go back to the seller to renegotiate the repairs the buyer found to come to a mutual agreement. =)

William Kelly · Answer

@Ian Cooperman Looking at these numbers it seems as though this could definitely work. How negotiable is the seller? When negotiating I would recommend anchoring the seller at a reasonably conservative ARV and negotiate it down from there. This will help you be able to get closer to the number that you want. I would also walk the seller through each option they have so that you aren't pressuring them into your "low" offer. I would ask them questions such as "why don't you list it with a realtor?" "Why not fix this up yourself?" "Why not put a little work into it and rent it out?" and lastly "why not keep the property?". This will help the seller feel as though he is almost trying to sell YOU the property since he doesn't want to use any of those options and hopefully help you guys come to a better agreement on price.

And in the cases that they do pick the other options well then you truly were able to do what was best for the seller and help them out in their situation. Hope this helps!

Larry Turowski · Answer

@Ian Cooperman if you get it for $60K as per your report, then yes definitely.  My personal criteria is:

ARV * .75 - repairs.

In your case that works out to be:

$135K * .75 - $30K = $71,250

Of course, I find the most wholesalers underestimate repairs and overestimate ARV.  I assume you don't have it under contract.  If you do, PM me, I've done out of state flips before.

Ian Cooperman · Answer

@William Kelly will do. Thanks again!

Ian Cooperman · Answer

@William Kelly - got it. That makes sense!

I actually just received the contract for review. Looks like seller doesn't allow property inspections after Effective Date. Below is the deets. So would I just use the same contract stipulation with the end buyer? If so, I'm assuming it might be challenging to find a buyer that doesn't have the allotted time to do an inspection?

PROPERTY INSPECTIONS AND RIGHT TO CANCEL: Buyer shall have __0__ (if left blank, then 15) days after Effective Date (“Inspection Period”) within which to have such inspections of the Property performed as Buyer shall desire during the Inspection Period. If Buyer determines, in Buyer’s sole discretion, that the Property is not acceptable to Buyer, Buyer may terminate this Contract by delivering written notice of such election to Seller prior to expiration of Inspection Period. If Buyer timely terminates this Contract, the Deposit paid shall be returned to Buyer, thereupon, Buyer and Seller shall be released of all further obligations under this Contract; however, Buyer shall be responsible for prompt payment for such inspections, for repair of damage to, and restoration of, the Property resulting from such inspections, and shall provide Seller with paid receipts for all work done on the Property (the preceding provision shall survive termination of this Contract). Unless Buyer exercises the right to terminate granted herein, Buyer accepts the physical condition of the Property and any violation of governmental, building, environmental, and safety codes, restrictions, or requirements, but subject to Seller’s continuing AS IS Maintenance Requirement, and Buyer shall be responsible for any and all repairs and improvements required by Buyer’s lender.

Ian Cooperman · Answer

Thanks @Larry T. for the info. Will reach out if we get this under contract. These types of properties don't sit long in this market and that area so might already be under contract. I had my contractor take a look at it this morning and said it looks to be less than $30k but that's just looking at photos. I need to figure out what kind of buffer I should put on the repair costs to ensure I'm not underestimating. As far as the ARV, I think I'm pretty close but, again, I'm new so could be off on it (it's the one w/the heart)

@William Kelly - great advice. Thank you!

This property is being sold through a broker. Should that be a concern? And should I ask the same questions, you think?

[Calc Review] Would you take this offer?

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