Opinion from Experts

[Edgar Cifuentes]

Hello, I wanted to get some opinions/critiques on possibly what I could have done to secure a deal, that is still possible in the near future. Background- I had a lady call me wanting to get a offer so I went to scope it out, she is having a home built and will be moving into it around October/November. Here current house that she is wanting to get rid of is a SFR 3Bed/2Bath in the suburbs of Houston, good condition less than 5k in repairs. Comps in the area go for 130k-150k for similar style houses (same neighborhood) and will most likely sell quickly due to the housing demand we will be having in Houston. She owes 80K and I told her I will most likely offer her 80K which will leave her without much after living there for 15 years. I didnt really pursue any negotiations but did build rapport and got a inspection for her new house out of it, however she didn't feel insulted by the offer and may (crossing my fingers) follow up with me if she cant get the house sold. I told them about placing the house on FSBO.com and Craigslist to see if they are able to sell it. Both her and her husband were very appreciative of me for giving them a start and not trying to just get their house from them. I explained to them how I could help them avoid the repairs and closing costs which I believed they liked as well. This was my first meeting with someone as an investor and would just like some comments on what I could have done better or what other experienced investors may have done differently. Thank you for reading and sorry for the long post I tried to keep it short.

Edgar

[Will Barnard]

The 70% rule, or more appropriately should be called "guideline" is a quick back of the napkin calculation to see if a deal comes within the range of possibility. One must consider price point (if the exit value is under $100k, then the 70% rule needs to be more like 65% or better) and if the exit is say $500k and in a hot market, then rehab flippers could still make money today (key word today) at 80% rule.

The price point, the market conditions, the level of rehab, the rehab extent, the individual investors capabilities, the financing, and many other factors all come into play. So to say that "all the investors and gurus in Houston talk about the 70% rule", you need to realize that some of them are either rookies and regurgitating what they have heard, some are talking in a general sense, and some are just naive. I have done deals at 80% and made $100k plus, did not meet or come close to any 70% rule and yet I was successful.

This rule is just a guideline and is not the end all be all.