FSBO Help -- worth making an offer?

Question

Hi BP people,

This is my first post on the deal analysis and advice page so any and all advice is welcomed.

Totally new to REI so putting myself out there and making calls to FSBO to gain some experience. First strategy I am focusing on is wholesaling. Might have a decent first deal but hoping someone can help me fill in the gaps of additional information I need.

Owner listed property for $110k (Pilot Mountain, NC) 1300 sqft, 2 bed / 1 bath. Current estimated value is $123k

I asked him why he was selling and he said they bought a new place so currently have two mortgages until they can sell (motivated seller). He's been trying to sell for a couple months.

He said the only thing the home needs is the exterior needs to be painted. Inside has nice hardwood floors and roof is only a few years old.

Mortgage balance is ~$65k and monthly payments $600.

When I said we could pay in cash, he said he would consider taking $90k.

What other information do I need to take this to an investor to try and work on a wholesale deal?

Do I need to first get a contract in writing before seeking investors? (with an escape clause written in case I'm unable to find an investor in X amount of days)

Do I also find / hire a contractor to go give an estimate on repair values of the home before seeking investors?

Hope these questions aren't too novice. I look forward to some feedback and insights :)

--Brian

Adrien C. · Answer

It's not a deal at 90 and probably needs more work than he's saying. Why else didn't it sell if it was listed for some time.

Lets say you get it at 90 and assigned at 95. The investor puts in 15 and is all in at 110. If he sells at 125, he is like walking with 115 after commissions/closing costs. Now subtract the insurance, utilities, and taxes during the time between buying and selling. There's nothing left for profit.

It only makes sense if the investor can increase value by adding on something like a bed room or large family room or something OR you get the price down to 75 for the investor. Sometimes it's better to walk from a bad deal then to try and force one when it's not there.

Brian Compton · Answer

Thanks, Account Closed

I am just planning on wholesaling. I don't really live near Pilot Mountain (where property is located) and have no interest in flipping in myself. I just want to find someone that is interested and do an "assignment of contract" with them.

I checked comps in that area and looked back to 2014 and 2015 and didn't really see anything. The property is out in the country so it wasn't as easy as finding a populated neighborhood in a larger town with tons of homes for sale. I didn't know how far back I should look or if there is any value in seeing what comps sold for many years ago? Again, that's part of me not really knowing what I'm doing so open to advice here as well, haha.

What would you suggest my next steps be?

1 -- make an offer at $90k? (with escape clause written in)

2 -- if accepted, find a contractor to estimate repair costs

3 -- if numbers add up, find an investor

Thanks again! Genuinely appreciate you taking the time to read / respond.

--Brian

Account Closed · Answer

Hi @Brian Compton Yes it sounds like something is fishi to me it might be to good of a deal.

1) Get a contractor and check the major repair problems, roof, pluming and structure you don't want to get into a problem like that.

2) are you gonna flip check how the market is in your area why is it been in market for months

3) if you have any questions feel free to ask

Brian Compton · Answer

Adrien S. thanks so much for the response! And for the advice.  Truly appreciate it man.

--Brian

Lenzy Ruffin · Answer

For comps, you want to stay within the last six months (last three is better) and within a half a mile radius of the subject property. That will vary some in different markets, but that's basically what you're looking for in a comp. Also, for it to be a comp, it needs to be a similar property (house style, similar square footage, etc).

If a property you're looking at doesn't have any comps that meet those criteria, find another property. Definitely stay away from houses way out in the country. You want to look at houses in areas where there is a good amount of buying and selling going on. It's easy to find comps because houses are being bought and sold. It's easy to find buyers (rehabbers and retail buyers) because houses are being bought and sold. People want to live in that area and the real estate activity reflects that. There is a much smaller market for that house out in the country, which means limited opportunities to sell it. That's not what you're looking for as an investor. You want houses that will sell quickly.

FSBO Help -- worth making an offer?

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