Driving for dollars - found a place near me - whats next?

[Michael Gertz]

Hey BP'ers!

I have a house that looks to be an estate that no one is living in.  I checked the mail - yeah it was on the porch and noticed that the owner hasn't paid their water bill.  Found on NJ Parcels that no loan is registered - I assume that isn't always accurate but ok.  Called the tax office and received the latest address of the owner.  I am about to send the owner a letter offering cash for the house and try to follow the Mike q of podcast 077 negotiation but he never offers a price. I tried that in a mock scenario with my wife and she kept asking me what I am offering in which I kept repeating to her, what am I offering....wasn't working out in that scenario!..

I believe the ARV is 425k and house needs about 25k rehab just to clean up, update landscape, and some paint as the house is in great condition. I have done total rehab's so I believe the estimate is pretty accurate.

Need help here on a couple of things:

1) If he asks what I want to pay - do I go with 70% rule?  Whats best practice?

2) What documents do I need to get a legal agreement should the owner agree?

3) How can I find his number just in case the owner disregards my big bold WILL BUY HOUSE FOR CASH

Any advise on working this deal or how to get a sellers attention at the best price is greatly appreciated.  Thanks

[Scott Nolan]

That's not going to work. The math is wrong.

If the After-Repair Value (ARV) is $425,000, your maximum offer using the 70% Rule is:

($425,000x.7) = $297,500 - $25,000 = $272,500 - $75,000 =$197,500 is your maximum offer.

That said, trying to get a $75,000 profit on a $425,000 house is unrealistic and will price you out of the market in nearly all cases. You should consider a profit more in line with 5-10% of ARV.