Possible Deal? Feels like I need to act FAST!!

[Julie Cadman]

I am looking for my first house to buy and hold or flip. Here's one that is really standing out, tell me what you think.

Lady wants to move March 1st. Very motivated, just stressed with moving and wants things to be easier for her. Realtor told her to list for $270,000 to sell quickly, she is asking $223,000. She is not listing with realtor yet, but might later this week. She bought it in 2001 for $197,000 (I know this is not really relevant though).

House built in 1994, 5 bd, 2 3/4 ba. Nice neighborhood, close to town, fenced in yard, finished basement, ranch style, attached garage. I have used 11 different websites to determine comps, averaging about $263,000 (ARV), conservatively. New furnace and water heater, roof looks good, foundation looks good... the only thing I can find wrong is it needs updating and some newer flooring in most rooms.

I am trying to figure out what "number" would be my max offer, and where I should start. I'm guessing a budget of $10,000 should be more than enough for updating and any other little things that are bound to come up. (I realize this could be more if something big comes up, but I don't see anything as of yet.)

Now, if my estimated ARV is $263,000, 70% would be $184,000. Minus updates/repairs ($10,000), would equal $174,000. Would that be my max offer?? I am thinking that I will flip this one, to give me more money to invest in more properties. I have a realtor that I would like to talk to about selling it for me also. It is a little farther away than I would like for a rental anyways.

I have talked to her and she is very motivated. Would I offend her if I offered less than what she paid for it? I am also going to be asking for seller financing, but making everything as simple for her as I can. I think that is the big selling point for her. She wants to get into her new place asap and is stressed with moving.

Thanks in advance for all your help!!!

[Jon Holdman]

If she will do seller financing and you only need $10k in rehab you can afford to go higher than the 70% number. That number assumes hard money and a six month hold. With a small rehab and the prime selling season not too far away you wouldn't need too much cash for too long to turn this deal. The 70% rule of thumb assumes about 7% of ARV goes to the hard money lender. If this has a conventional bank loan on it and you just take over the payments for the time being your money costs will be much less. That would let you go higher on the price and still make money.

Estimating ARV is the hardest step in this process. Be sure you're comparing it to properties with the same style and in similar condition.