Advice/Need guidance

[Michael Hartman]

Okay BP... Just talked to my first seller today. He owns a vacant property that needs a ton of work. After speaking with him he definitely seems eager to get rid of the property, he owes 3 years of back taxes on the property and after talking to the tax accessor they will be foreclosing in May. When I asked, "How much were you thinking of selling the property for?" He said he wasn't sure and wanted me to come up with some numbers. He told me he knew that the property would need a lot in repairs (which I already knew). I told him that the back taxes would be a big part of my total offer which he seemed fine with. I have seen the property, there are holes in the roof, all the windows are busted out, mold, kitchen is not too bad but the bathrooms are going to need to be redone, etc. I believe it will be a total renovation so my partner and I are assuming a huge number of repair costs... (Approx. $100k) Would it be a good idea to bring a contractor out to take a look at the place to give me an actual bid? Should I just assume with a total renovation that even if I overshoot the repair costs it's okay because that improves the flippers profit? Side note, I was told by the city that they work with investors and Lowes to reduce repair costs, offer grants and can even help sell the property to retired veterans. What is my next best course of action? I could use all the help I can get!!

[Karen Rittenhouse]

Wow, there's so much wrong in this question.

First thing here, if this is your first seller, it's way too big a project for you. Perhaps you can sell the lead to a seasoned investor.

Next, you're "assuming" a number that you think might be "huge"??? We have plenty of renovations over $100,000 that don't need nearly this much work. Naturally, we don't know enough from your question to "guess" whether or not you're close, but the fact that you have no idea tells me you shouldn't touch this.

As @Saul Pizzuro said, never "assume" what the city is telling you will happen. Figure your true costs and always go by that. But never, never, never just "assume" you can offer higher than what they owe. A huge percentage of our offers are less than the seller owes, and the seller pays us to take over the property. Plenty of sellers, even retail sellers, write checks at closing. Do not simply offer "a couple grand over the loan amount."

You can never guess at numbers, unless you want to fail. You MUST know true costs of repairs and ARV as well as all the other myriad of costs you will incur in a purchase, renovation, hold, resell. It absolutely sounds to me like, even if you have a contractor estimate repairs and if this contractor is actually correct in the number, you are not skilled enough to take this on.

Until you know how to figure costs, especially on a project of this size, continue going to meetings where you can learn information and find investors who will work with you through some deals until you get the experience you need to be successful.

Please let us know what you do here.

Wishing you much successful investing.