Deal or dash, what would you do?

Question

Let me start by saying I am new to this and even though I have been educating myself as much as possible; I might not recognize a good deal if it clipped me in the head with a sledge hammer. I may be equally as likely to jump all over something that I should not have touched because I'm anxious to get my 1st deal under my belt. So any advice would be appreciated!

Here are the details: 
- It's a 3bd 2ba 1760sqft twnhse in a ski area.
 
- It doesn't need any repairs and it's fully furnished.
 
- The owner is in his 70s and lives out of state. He can't use the property any more and he is motivated to sell.

- The local Realtor ran comps and said they run from $610,000-$700,000, FMV is $620,000, the 30 quick sale is $550,000.
 
- The average time on market is 120 days.

- The Seller offered to sell for $510,000 without any negotiation so I'm sure he'd go down farther with a real offer.

- My target would be $460,000-$475,000. He does owe $440,000 on it.

I'm working on the funding but I'm considering trying to get a 60 day close and option it off so I wouldn't need to sweat finding money. I'd have to include an escape clause just in case I couldn't find a buyer.

Would you work this deal? If so what exit strategy would you employ?

- Flex option contract, find a funder willing to do an equity share of $620,000, ...or drop it like a hot rock and run.

Thanks in advance. 
Bill

Mark Gilbo · Answer

Most wont Michael but when you deal with a MOTIVATED seller, you'd be surprised what they will allow.  I option properties for $10.

Michael D. · Answer

Wendell De Guzman, I don't have any experience with RE options, but it doesn't make sense to me that a seller would allow you to take his property off the market for 6 months for $100. Can you help me understand that a little better?

Michael

Bill Wilson · Answer

Wendell and Dev, thank you both for the advise! I had some concerns about the Resort aspect of this as well so I double checked the numbers and time frames with another local agent. He confirmed everything so I think we are going to pursue this the way Wendell described. I will keep you posted as we try to negotiate the price with the seller.

Thanks again!

Best,
Bill

Dev Horn · Answer

There are 2 red flags (or maybe they're yellow =) :: (1) Townhouse and (2) Ski area -- sounds like a "vacation property" and the dynamics of that market can be very different from the regular SFR market.  With that said, I have no expertise in vacation/resort housing.  It may indeed be a deal where you can make some good money....  But I sure would like to see you, as a new investor, finding that first deal back down the mountain in a nice mid- to lower-priced neighborhood of SFRs in the suburbs.

I wouldn't give up on this deal - look for a way to score there, but don't take your eyes of the ball - continue your quest for more traditional types of deals where it will be easier to find eager buyers.

Wendell De Guzman · Answer

Bill Wilson,

I would tread carefully. It's not cheap enough to wholesale it to another investor.

Yes. Negotiate and get it as low as possible (say $460K).

Then put a 90-day option to buy on it with a $100 option fee (with a right to extend for another 90 days...giving you essentially 6 months to tie up the property).

Market it like crazy (put it in the MLS, put bandit signs, Craigslist, etc.) to sell it to an end buyer who is prequalified for a mortgage for $610K (lower end for a quick sale).

Equity partners won't work for a mediocre deal like this.
If it's not cheap enough to wholesale, it's not cheap enough to partner on.

Even if it's not cheap enough...you can still make money on it.
Let me know how this deal goes.