Some updates since I started this thread
I stepped away from that $70k deal and I'm glad I did. I've invested my time in reading and learning about the Houston market. I've also been developing relationships with investors and other key people in the area. This is where I stand today:
I've branded created the logo & website and started branding my business with business cards, etc. I am a firm believer in branding.
I have applied for my LLC, but the company name I chose relates to another company with similar words. I am waiting on documentation from them agreeing that I can use the legal entity that I have chosen in the state of Texas. I have got verbal agreement, but I do need written consent to move forward. If not, I'll file a DBA and still move forward with my name. No worries here.
I have developed a relationship with a hard money lender here in town, and have got all info to them to be pre-qualified to buy when the need arises. I have shifted my strategy from using my own funds for this. I guess you could say I am more focused on ROI now.
I have been speaking with contractors and have a list of people I will be using for all sorts of work. I have about 3-4 people for each type of work needed, and for bids.
Last but not least, a house that I have had my eye on for about 6 months has recently gone back on the market. It has gone under contract 3 times now, and every time the deal has fell through. Here are the details:
The house was originally listed at $90,000 with 1,272 sq. ft. 3/2/2 in a nice neighborhood. The comps come in to this house around $109k - $120k depending on how much we put in this (granite & full tile on the high end).
Every since I have been looking at this house, there has been a leak at the water inlet into the house. About 2 months ago this was fixed. So for about 4 months, there was running water inside the wall of the house. I am hoping there is no mold.
I went by the property the other day, and low and behold it is still for sale. I contact the broker again, and spoke with a new agent. I asked him a few questions, particularly why this has been under contract 3 times. He checked with their REO department and found out the house has plumbing issues (knew about this one), roof issues (knew about this one too), and possible foundation issues. I have a feeling this is why buyers backed out. It is not move in ready.
I am going to check the inside out on Tuesday. I've ran the numbers 3 or 4 times on this deal, and this is what I come up with:
Purchase price: $65,000
Down payment: $10,000
ARV: $109,000
Buying cost: $975 (1.5% ARV)
Holding cost: $975 (1.5% ARV)
Cost of Money: $2,859
Selling Cost: $7,085 (6.5% ARV)
Budget repair cost: $13,650
Loan terms:
13.99% @ 6 months
Monthly rate: 1.17%
Total cost of interest per month: $800.34
Total cost of money (based on 3.5 months): $2,859.72
Which translates to...
ARV: $109,000
Less Improvement Cost: $13,650
Less Quiet Cost: $11,894
Less Minimum Profit: $13,239
Equals Maximum Offer Amount: $70,215
Hope these numbers add up right. I've based these numbers very conservatively, and will be listing the house myself (6.5% selling cost should be around 3.5%).
I will be happy walking away with $15k+ on this deal. I would appreciate if someone could run my numbers to make sure I'm adding/subtracting everything the right way. I hope to learn a lot on this first deal. I'm always looking to learn more.
I'll post more info and pics Tues
