1st Deal Progress Report....Advice??

[Aaron Foster]

Here's where I'm at right now. A partner of mine bird dogged a bunch of properties that looked to be vacant and recorded the addresses. There is one property in particular that we have spoken with the owner about. The guy and his brother (who are not on speaking terms) inherited the home from their parents. The house hasn't been lived in for about 18 months. The yard is overgrown, the tree in the front yard completely blocks the front view of the house. I attempted to contact a contractor to assist me in viewing the home, but did not have much luck. When we finally gained access to the house, I just took pictures and video, so that i could possibly show it to a contractor later on. The home was actually more well kept than I had hoped. Most of their parents' belongings, including clothes, furniture, appliances, and junk, were still in the house, but from what i could see, the house looked like it would be just about ready to live in once everything was removed. There was actually so much funiture that i gave a serious moment of consideration towards making a bid on the lot of furniture and finding a buyer, similarly to what I am attempting to do with his home, but i digress. There were all kinds of bugs inside and out like wasps, bees, roaches, and spiders. The kitchen has some old school wood paneling, but still looks to be in great shape. The place could probably also use some new carpet in the carpeted areas, as there was quite a pungeant smell throughout the dwelling. Maybe could use a couple brush strokes here and there. The guy said the roof was in good shape the last time he had it checked less than 2 years ago. Of course, I barely know what I'm looking at, and i could still desperately use the opinion of someone who does. Also, the code enforcement officer had recently put a notice to abate on the front door. i didn't get a chance to check the date on it before the owner ripped it off the door. The home's ARV is about 112,750. I couldn't get the owner to give me a number as far as what he was looking for. I figure that with a modest amount of repairs needed, an investor would be willing to pay around 80 for it. I don't have a repair estimate to work with so that i can crunch numbers, but i'm thinking that i'd start my negotiating around 50. I'll state again that those numbers are largely arbitrary. I have a contract ready that i downloaded from some real estate wholesaling site. It seems to have everything that it needs as far as being assignable, but i want it to have a financing contingency as well. i am not sure how to insert this into my contract. i have also contacted an investor-friendly title company, but i have yet to speak with any potential buyers. there are "we buy houses" flyers everywhere around here though, and i have been building a list of people i could call, should the seller accept my offer. my main thoughts and concerns right now are coming up with an offer that i can feel comfortable with, getting in contact with a contractor who is friendly to my cause, getting my contract ready, preparing to approach the title company, and of course closing the deal with a buyer. i'll be posting more progress when i make it. any advice feedback or experience is appreciated! -Aaron

[J Scott]

Agreed with Ned about the difficulty in reading your post.

Based on your description of the property, I'm guessing there are plenty more renovations required than you anticipate. You didn't mention if the HVAC was in working order, if the applicances were good, if the plumbing worked, if the siding/gutters were in good shape, if the windows needed to be replaced, etc. Even if all these things are good, the smallest amount of renovations I've ever done a property I've retailed is about $15K, which is a basic cosmetic remodel.

Let's say that this house is in awesome condition and only needs $15K in repairs. If the ARV is $110,000 (a bit more conservative than your number), then the most I'd pay for this property as an investor would be about $65-70K, and I have a feeling that after seeing it, my number would probably be lower.

You need to get an accurate assessment of the renovation costs and go from there. But, you're likely going to need to get it below $70K for it to be a rehab deal, which means you'll need to get it below $65K for it to be a wholesale deal. And perhaps much lower depending on the results of the inspection.