first deal under contract

[Paul Coin]

Folks I have my first deal under contract and am in due diligence time . Price 65000 in Henderson County, NC. In good neighborhood. My Realtor says the property should have ARV of 140,000$. Looks like there is about 20000 equity after repairs. The idea is to us my VA loan and live in for a year and then repair all and flip but now my ex who I have no separation papers from refuses to sign off. I purchased the property subject to. Any ideas please let me know. Thanks in advance. Paul Coin.

[Joshua Nudell]

Hi Paul,

Let me see if I have the numbers right:

$65,000 purchase price

$55,000 renovation work

$140,000 ARV

I have several problems with this. The only solid number you have is the purchase price. Your ARV you got from a realtor (hopefully not the realtor who is selling the property for the current owner). Where did you get the renovation estimates? What are your carrying costs while the property is being renovated? Are you going to live in it while it's being renovated? Are you paying for the renovation costs out of pocket (as far as I know VA loans only work for move-in-ready properties)?

If the ARV is $140,000, then you should not be paying more than 75% of ARV AFTER repairs, which is $105,000 - $55,000 = $50,000. That's only if it's a pretty good area, most people look for 65% - 70% of ARV to get a deal.

If you're in due diligence phase, you should be checking comps for the area and talking to several (3 or more) contractors to get estimates for the work to be done.

As far as the ex-wife not signing off, it sounds like you should find a way out of this deal until you can clear up the ex-wife issue.  Wholesaling it might be an idea, but I'm not sure the numbers make sense for a wholesale (or a flip).  If you have a contingency for the financing of the property you can use that to let the deal fall through.