First Deal...Maybe...

[Chad533 1]

So I did my usual 2 e-mail marketing and finally got a "yes, I am interested". Yeah for me!!! ...maybe. After a few emails he stated that he stated: "I want $2k per month, one yr lease, tenant pays all utilities"

 

The background to all this that I found out from my top notch detective skills was that he bought the house on a foreclosure for $95k in June. Fixed it up with all new bells and whistles, new floor, new roof, etc. He first listed it on Zillow in June for 175k, then lowered it a few days ago to $169,900, now listed for $165,000

 

My questions, Is Isaac going to hit FL? Then I wonder, with his terms, is there anyway I can even make a profit? His terms seem to be what I should be offering to a t/b. What should I try to get the terms to? What would a reasonable option consideration be if I was able to manage to get this? I was thinking at least $5k.

 

BTW, the house is 4bd/2ba, 1152 SqFt. Built in 1980. Not a bad house.

 

Here were the comps I was able to get, I dont see how I can even get his asking. What would you think my asking price to the seller shouls be, and the price to the t/b be? Comparable Sales Data No. Address Date Price $/SF Bld/Area RM/BR/Bth YB Lot Area Pool Proxim. Subject Property 06/04/2012 $95,000 $82 1,152 6/4/1

1980

 

12,197 SF

1 139 BRADLEY AVE 07/18/2012 $80,000 $49 1,628 6/3/1

1882

7,405 SF

.84Mi. 2 99 BURKE ST 07/02/2012 $120,000 $141 849 5/3/1

1950

4,356 SF

.50Mi. 3 434 WOODIN ST 07/02/2012 $154,500 $111 1,388 5/2/1

1945

6,970 SF

.52Mi. 4 545 WOODIN ST 06/05/2012 $112,000 $85 1,306 6/4/1

1952

6,970 SF

.70Mi. 5 15 ROCKVIEW RD 05/23/2012 $117,000 $66 1,751 7/3/1

1948

5,663 SF

.34Mi. 6 74 WILMOT RD 05/23/2012 $187,000 $135 1,376 6/3/1

1941

10,454 SF

.66Mi. 7 53 MICHAEL RD 05/21/2012 $114,900 $95 1,200 6/4/1

1948

6,970 SF

.52Mi. 8 87 LONG MEADOW AVE 05/14/2012 $160,000 $106 1,497 6/3/1

1940

7,405 SF

.61Mi. 9 219 FAIRVIEW AVE 05/09/2012 $11,500 $8 1,320 6/3/1

1947

10,890 SF

.49Mi. 10 40 FURMAN RD 04/30/2012 $156,000 $150 1,040 5/3/1

1955

7,841 SF

.38Mi. 11 465 PINE ROCK AVE 04/10/2012 $135,000 $119 1,134 5/2/1

1925

6,534 SF

.47Mi. 12 154 WILMOT RD 04/05/2012 $140,000 $123 1,138 6/2/1

1942

7,841 SF

.71Mi. 13 433 PINE ROCK AVE 03/30/2012 $161,400 $210 768 4/2/1

1950

6,098 SF

.41Mi. 14 397 WOODIN ST 03/29/2012 $183,000 $130 1,407 7/2/2

1947

6,098 SF

.50Mi. 15 191 OBERLIN RD 03/27/2012 $125,000 $91 1,360 6/3/1

1947

8,276 SF

.62Mi.

 

 

Any and all help would be appreciated. I do realize he is potentially a rehabber, but maybe he can rehab them, and I can find buyers for him.

[DeeLight 8]

Hi Chad, I'll share what I've earned so far; some of the experts will probably add more.

 

First let me say that it all makes perfect sense before we start doing the deals---or have the opp to feel like we might do a deal. For me this is where the biggest learning has happened---------hmm, just like Michael said, imagine that

 

I think you've read The Manual, right? I've read it almost 3 times and still get stuck.

 

So I did my usual 2 e-mail marketing and finally got a "yes, I am interested". Feels good for a minit, right? Yeah for me!!! ...maybe. After a few emails he stated that he stated: "I want $2k per month, one yr lease, tenant pays all utilities" Yeah, yeah, yeah they always want. This isn't about their want (mostly). It's about the numbers 1st. They either make sense or not. All of us newbies want to "make it work" but it won't be worth it in the long haul . . . for anyone.

 

The background to all this that I found out from my top notch detective skills was that he bought the house on a foreclosure for $95k in June. Fixed it up with all new bells and whistles, new floor, new roof, etc. He first listed it on Zillow in June for 175k, then lowered it a few days ago to $169,900, now listed for $165,000

 

My questions, Is Isaac going to hit FL? Then I wonder, with his terms, is there anyway I can even make a profit? His terms seem to be what I should be offering to a t/b. What should I try to get the terms to? What would a reasonable option consideration be if I was able to manage to get this? I was thinking at least $5k. None of this can be calculated, I think, until a real fmv can be arrived at. It would be good to go back and read Michael's awesome info on figuring the TRUE comps and $$ price per sf. The general rule of thumb is about 3% is the option $$ but sometimes it can be more or less depending on the deal. So you can see you won't know if it's $5k or $10k or whatever until you figure out the price YOU think it will sell at.

 

BTW, the house is 4bd/2ba, 1152 SqFt. Built in 1980. Not a bad house.

 

Here were the comps I was able to get, I dont see how I can even get his asking. A ooooo ga!!! warning, warning, your gut is telling you stuff already!! Trust it.

 

You can do this if you follow Michael's formulas in The Manual.What would you think my asking price to the seller shouls be, and the price to the t/b be? I pick 5 comps (if I am lucky enuf to have that many. Compare price per sf---apples with apples. I throw out the high one and the low one and average out the remaining 3. Once emotions are out of the way and shrugging off "Gotta-do-a-deal-itis" it'a all pretty easy. Comparable Sales Data No. Address Date Price $/SF Bld/Area RM/BR/Bth YB Lot Area Pool Proxim. Subject Property 06/04/2012 $95,000 $82 1,152 6/4/1

1980

 

12,197 SF

1 139 BRADLEY AVE 07/18/2012 $80,000 $49 1,628 6/3/1

1882

7,405 SF

.84Mi. 2 99 BURKE ST 07/02/2012 $120,000 $141 849 5/3/1

1950

4,356 SF

.50Mi. 3 434 WOODIN ST 07/02/2012 $154,500 $111 1,388 5/2/1

1945

6,970 SF

.52Mi. 4 545 WOODIN ST 06/05/2012 $112,000 $85 1,306 6/4/1

1952

6,970 SF

.70Mi. 5 15 ROCKVIEW RD 05/23/2012 $117,000 $66 1,751 7/3/1

1948

5,663 SF

.34Mi. 6 74 WILMOT RD 05/23/2012 $187,000 $135 1,376 6/3/1

1941

10,454 SF

.66Mi. 7 53 MICHAEL RD 05/21/2012 $114,900 $95 1,200 6/4/1

1948

6,970 SF

.52Mi. 8 87 LONG MEADOW AVE 05/14/2012 $160,000 $106 1,497 6/3/1

1940

7,405 SF

.61Mi. 9 219 FAIRVIEW AVE 05/09/2012 $11,500 $8 1,320 6/3/1

1947

10,890 SF

.49Mi. 10 40 FURMAN RD 04/30/2012 $156,000 $150 1,040 5/3/1

1955

7,841 SF

.38Mi. 11 465 PINE ROCK AVE 04/10/2012 $135,000 $119 1,134 5/2/1

1925

6,534 SF

.47Mi. 12 154 WILMOT RD 04/05/2012 $140,000 $123 1,138 6/2/1

1942

7,841 SF

.71Mi. 13 433 PINE ROCK AVE 03/30/2012 $161,400 $210 768 4/2/1

1950

6,098 SF

.41Mi. 14 397 WOODIN ST 03/29/2012 $183,000 $130 1,407 7/2/2

1947

6,098 SF

.50Mi. 15 191 OBERLIN RD 03/27/2012 $125,000 $91 1,360 6/3/1

1947

8,276 SF

.62Mi.

 

 

Any and all help would be appreciated. I do realize he is potentially a rehabber, but maybe he can rehab them, and I can find buyers for him. It's a great idea, one that I've had myself Chad. However, sometimes people want ridiculous things . . . maybe for real reasons. Maybe he paid too much for the house or put too much into the house or maybe he's read too many guru courses. It could work but only if the numbers work for you. My opinion is it's better to keep marketing for a real deal than to waste prcious time trying to fit a square peg in a round hole.

 

I am not a know-it-all. These are just a few things I've gotten along the way as a complete newbie in l/o's. It's my job to let the seller in on a dose of reality (if they need it) and then let them do what they want. I'm definitely NOT in the business of trying to convince someone to do a deal with me. I've had 4 maybe's this week but none of them was a real deal. This might be a good deal but you won't know til you do the math.

 

One more thing, as Michael teaches here a lot: YOU have to stay in control of the deal. They aren't in control. I just gather info and then run it through the numbers and see what the seller wants to do with it. Let us know what you find out. I can't wait to hear!!

[MichaelC 160]

Chad, for the most part I avoid working with other "investors". I'm pretty sure this guy senses you're new and will step all over you if you let him. Forget whatever numbers he's telling you he wants. Run the numbers yourself and detemine what are the realistic rent and purchase price. If they are vastly different, (I suspect they will be), tell him so and ask him where he came up with his terms. Then shut up and let him justify his position. He won't be able to, in which case you have saved yourself time and aggravation. Let him fight the market himself while you look elsewhere.

[Chad533 1]

Thanks for the advice. I do realize that I am getting a little excited. It just felt nice to get my first inkling of a yes. I was just on auto pilot emailing to potential people and getting a no or no answer, which I do realize will happen more times than a yes. Since this guy keeps lowering his price, I will give him my numbers on the short offer form so he can keep it around so if...and hopefully when...he relizes he can't sell at his prices he will come to me.

 

 

On a side note, I did get this response from another 1st email I sent asking if he was interested in a lease purchase which made me laugh:

 

"No I want to sell and never return or worry about this home if you're interested in purchase send note otherwise NOPE "

 

He is definitly motivated!!! Just not for me...maybe. I will try a pure option with him and see if he bites, if not, NEXT!

[DeeLight 8]

Chad, I TOTALLY get the warm fuzzies at the thot of a "yes" after hours of sitting combing thru the CL listings for a possible deal. I understand. Please post what you came up for an offer so we can share in the fun (madness)

 

On this latest response you got: if he wants to walk away so bad (and spit on the property as he leaves ) he should be willing to take a pretty good discount; maybe buy at 80% would bring a quick buyer.

[Chad533 1]

UPDATE

 

Response from seller before I was about to send him my offer.

 

"I am going to try and sell it over the couple of months, if i dont i would be interested in leasing, do you have a website"

 

I have a feeling he won't be too happy with my offer. I came up with $125k, net. He is asking $165k currently. I figured I can sell it for $155k. this is how I got to the price.

 

Comps:

Property 1: $66/sqft

Property 2: $85/sqft

Property 3: $106/sqft

Property 4: $95/sqft

Property 5: $135/sqft

Property 6: $49/sqft

 

Drop the high and low extremes and you come up with an average of $88/sqft. This house was totally updated, new roof, floors, appliances, etc. the hose was built in 1980. The next closest in the comp list was built in 1950. So assuming the age and all the upgrades, I took one of the comp prices of $106/sqft to determine the list price to the seller of about $125k. I want to list it to buyers at $155k-$150k. I got this number by using the highest comp of $135 since it is a vert nice house, good views, relatively new for the area, total rehab. I am also basing it on the fact he bought it at foreclosure for 95k, upgrade costs I am guessing at $20k-$25k, so his break even would be $115k-120k. So this would leave him with a $5k-10k profit. I would probably need to split the option consideration, which I want to be as close to $5k as possible as well as the mark up profit of $25k-$30k. If the seller takes the option. I feel I am making this more complicated then it should be as well as getting SLO and CA intermixed.

 

My question. How do you determine if it is a SLO or a CA? This is an OOA property, so I would need him or someone local to help with the marketing. Would I send the short offer letter or form?

 

Also, how do you determine the monthly rent? Is there a formula, or you just do rental comps?

[DeeLight 8]

Hey Chad, Thanks for the update. I somehow missed Michael's post above---prob that I was rushing to get ready for the j.o.b. Of course everything he said is what we find out as we get on down the road.

 

I am answering within text again. Please stay in the game; it's good to have a noob buddy to share the journey with

 

UPDATE

 

Response from seller before I was about to send him my offer.

 

"I am going to try and sell it over the couple of months, if i dont i would be interested in leasing, do you have a website" WHAT--ev!!! (which means what ever!!!) Website . . . please. Did I say, What ev???? I've talked to quite a few investors/rehabbers and they aren't hung up on websites. Maybe I'm wrong but this sounds pretty pretentious to me.

 

I have a feeling he won't be too happy with my offer.

TFB did I say that???!!??

 

I came up with $125k, net. He is asking $165k currently. I figured I can sell it for $155k. Is this price with the rent credits figured in?? this is how I got to the price.

 

Comps:

Property 1: $66/sqft

Property 2: $85/sqft

Property 3: $106/sqft

Property 4: $95/sqft

Property 5: $135/sqft

Property 6: $49/sqft

 

Drop the high and low extremes and you come up with an average of $88/sqft. This house was totally updated, new roof, floors, appliances, etc. the hose was built in 1980. The next closest in the comp list was built in 1950. So assuming the age and all the upgrades, I took one of the comp prices of $106/sqft to determine the list price to the seller of about $125k. I want to list it to buyers at $155k-$150k. I got this number by using the highest comp of $135 since it is a vert nice house, good views, relatively new for the area, total rehab. I am also basing it on the fact he bought it at foreclosure for 95k, upgrade costs I am guessing at $20k-$25k, so his break even would be $115k-120k. So this would leave him with a $5k-10k profit. I would probably need to split the option consideration, which I want to be as close to $5k as possible as well as the mark up profit of $25k-$30k. If the seller takes the option. I feel I am making this more complicated then it should be as well as getting SLO and CA intermixed.

 

I will defer to the experts in answering the above---it prob comes to them as soon as they read it---I'd have to ruminate on it a bit

 

My question. How do you determine if it is a SLO or a CA? This is an OOA property, so I would need him or someone local to help with the marketing. Lots on OOA props here in the forum My understanding is that is the prop has a good amount ofequity then it's a candidate for a slo . . . .

 

Also, how do you determine the monthly rent? Is there a formula, or you just do rental comps?" Lots here in the forum about this: rentometer etc. You can search it.

 

Keep us informed Chad!!

[MichaelC 160]

Chad, no need to bother sending him and offer at this time. He's already stated he wants to try and sell it, so let him fight the market first. If he does sell it, good for him. If he doesn't he'll come calling again in two months or so. Then you have the motivating factor of time on your side, and the reality of the market weighing on his shoulders. He'll be more receptive to your offer then, at least he should be.