Just curious of my wholesale deal?

[Linda Govan]

Hello  BP members, 

I have a property that came my way via my yellow letter campaign I ran 2 months ago.  Its a total gut rehab project. There is no mortgage and the owner doesn't want a dime. Problem is I just found out that he has a $9k water bill attached to the property.  The taxes are in the rears by 3 years at $ 4300. The comps are barely there but from what I have found is at best $110k. Rehab cost my contractor is at the high end of $35k. I added an extra 10% just to be safe.  Could I hold the current owner liable for the back taxes or just inform any potential buyer? I am looking to market to landlords. I am in Chicago and rents are climbing.  This could be a buy and hold. Its a 3br/2ba with a 2 car garage.  I go Saturday to sign the contract.  The owner just wants it out of his name. Any help is greatly appreciated.  

[Corey Boone]

Hey Linda,

I am a newbie also, I really started in January for what its worth, but congrats for your first deal. The fact that is "free" is great. So when you sign the contract you will take the contract with the EMD to the title company and they will tell you what it takes for a clear title. You will need to add this into your cost when figure out your total cost. You can't make the seller pay since your are not paying anything for the property and you can think of it as your "buying cost".

Now I would say if you think it is $110k , confirm with a local agent, that is what the rest of your calcs will be based on, if you are off by 10%, there goes your wholesale fee. So the 110k*70% will equal your price to the cash buyer minus rehab cost so $77K-$15k(bills)-$38K(rehab)=$24K to YOU for a wholesale fee. (70% of ARV is normal for my area, not sure about yours) Which is a really good deal when you sell to buyer at $39K because one of you will have to pay the $15K at closing.

Now you can see how it will add up if you are off on anyone of these. For instance if you are off on a missed $10K mechanics lien and your home is actually worth $100K, now your take home is $5K. My newbie advice is do your due diligence and go for it! Lastly be upfront and honest because you will make a reputation for yourself with each deal.