would you touch this?

Question

Ok i looked at a house today owned by a construction worker.  He is in the process of having a house built and should be done in 30 to 40 days.

heres the deal.....house is tax valued at 83k..mkt value 87k to 92k
he owes 53k.....the house is in pretty decent shape. He has new cabinets sitting in the garage...original cabinets are decent. 3 bed 2 bath 1300+ sqft  1 bath is completely gutted but said he would throw in all the sheet rock..bath remains ..Has almost all materials to finish the job...all new ceiling fans.for every room....does need a little interior paint...not much exterior work needed....again he said he would throw in most of the materials ...now he wants 70k.....i said yea right....I talked him down to 63k. he wants to walk away with atleast 10k....told him i would talk to my partner so i havnt tied it up yet....i would like to be at around 58k...any thoughts? Would you touch this for 63k .......i personally would like to get it for 58k and wholesale it for 63k..

Aaron Schwartz · Answer

Ok so I met with the seller...and told him i would buy it for 58k and that it would be my final offer.   He said he would have to think about it alittle more to let it go for that price.  So for now its on to the next one.

Charles I would be suprised if you get a call.

Aaron Schwartz · Answer

Thats a good point Jon

You guys are right about not calculating the" selling the cabinets" in the math.  And i wasnt.  I just was meaning to point out that i would be saving time and money on not having to demo the kithen....and place and modify new cabinets. 
 
I meet with the seller again this evening ....ill let you know how it goes.

Adam Anderson · Answer

I wouldn't count on selling the cabinets when figuring the math. Cabinets are a hard thing to resell because the buyer has to be able to fit them into their

Jon Holdman · Answer

Aaron,
If you have a buyer who's willing to pay some amount, and can really perform, then you can certainly use that as a basis for your offer.  Not everyone has the same criteria.  The buyer may have is own money, avoiding hard money costs.  He may want to do all the rehab work himself, reducing his repair costs.  If the buyer will pay 60K, and the seller will sell for 58K, I'd think about pocketing 2K and moving along.  Just be sure the buyer is serious, and isn't going to leave you dangling.
Jon

Account Closed · Answer

You might get some cash for the cabinets. That is gray and really should not be material. It could be that you get very little for the cabinets. Make the deal work without that element or pass on the deal.

If you pay more than you are computing you are just reducing your profit. If you put in time to do the work yourself you are effectively making a bad deal worse by under valuing your time. Remember that you could get hurt or otherwise not be able to do the work so what happens then?

I am all for people doing their own work. Just pay yourself the going rate so you are not forced to do the work when something happens.

Any time you do the work yourself you also better be real clear about the closing costs plus holding costs. I am not sure they are truly factored into the prior math.

John Corey

Aaron Schwartz · Answer

jon you are exactly right ..those are the numbers that i got too...although the reason i posted is i might have a guy who would buy at maybe 60k -63k..i was looking for some feed back on what opinions you guys had at 63k and material coming along with it...I dont even think putting the new cabinets is neccassary. i probly could resale the cabinets. Comps in the area are an average of 67sqft without being updated too much. 
Ill Try to get him down to 56k-58k and rehab it myself. 
thanks jon

Jon Holdman · Answer

This sounds like a fix-and-flip.  Assuming your $87K value is correct (a big assumption that you must carefully validate), and guessing at 5K for the fixup (another assumption you must validate), then I would do this math:

87K
26K less 30%
5K less repair costs
5K what you want for a wholesale fee
51K max you can pay.

Jon