OfflineI have been working really hard to make my first deal. I got a response from a bandit sign from a guy who is divorced, newly engaged and wants to move on with his life. Ideal prospect, right? Only trouble is, he has established a bottom line for what he will accept ($260,000, he wants to walk away with 50K) and I think it is too high. I offered him $235,000 but he wouldn't take it, he said he would try selling it himself in the spring. I may just walk away from this deal but I was wondering if I should instead market it to landlords (via Craigslist)as my understanding is that they don't need quite as much profit as a flipper. Here are the numbers:
Single family, 5/3
Seller wants $260,000
ARV: $395,000
Fix up: $60,000
Rents for: $2000 pm
Would appreciate any and all advice!!
Thanks,
Katarina
Hello Katharina,
the problem you are having is fundamental, you are dealing with somebody who WANTS to sell his house. What we need are people that HAVE to sell their house, only then you can achieve a win win situation.
Good luck to you!
Thomas
Katrina,
Thomas is right about this seller; he is not motivated right now. I would walk away, but leave your information and offer with him. He may be more motivated in the spring. I would stop wasting time with this one and look to find other deals.
I took a negotiation training this past year from one of the biggest and best companies in the world and you might want to look a little closer if you are set on this property. What I mean is what is he wanting the do with the 50k? I learned sometimes that switching tactics on a seller and get them talking about the things they will do after a deal can give you great insight into why they want or need to sell in the first place.
One last thing I would tell the seller that you may not be available in the spring or conditions might change and you can completely understand he wishes, but leave the seller with the idea that he is passing up 25k right now. Don't do it in a threatening way, but wish him luck and thank him for his time.
Good luck, I hope my advice helps you.
Big difference. Above responses are absolutely correct. I will use this in my offers. GSanchez
Katarina,
no means 'no today'...
once you figured out your numbers, i.e. your max offer, you have to stick with it, don't give in.
If you have your buyers lined up, you can offer to close in 7 days with cash; there is no way that the owner will be able to do better than that
while the homeowner makes up his mind, don't let that one deal keep you from making other deals, keep moving forward....
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...
Did you do a soft pass over the phone? If you had said "Well it looks like homes in your area are selling for XX, obviously, Mr. Seller, I haven't seen your house but this is what homes in your particular area are selling for. _______, does that sound like something you would consider?
After repairs there are still 75k of room there with his offer. What do the closed cash transactions look like in that area versus ARV. How long are typically the days on market for homes listed at retail?
Does he have a good loan in place to where you could offer his price but keep the existing loan in place and do some sort of lease option or subject-to?
"A man who has never lost himself in a cause bigger than himself has missed one of life's mountaintop experiences." Richard Nixon
I'm learning the hard way (long story) that "almost a deal" is NOT A DEAL. You'll know if it's a deal because you won't have to wonder if you should do something with it or not.
If you have to work or wonder, let it go. I went thru two of these at first, and the second one is where I'm learning lessons here.
Tell you what the best way to find out if this is a deal or not. Call a local property management company and tell them you're a wholesaler and have a potential deal for a landlord. Be open, tell them the numbers. THEY WILL TELL YOU if their clients are people who would be interested.
The nice thing? You can validate the deal AND line up buyers with one phone call...
BUT, if they suggest you not do it? Drop it like a hot potato and spend your time looking for the next deal... don't even mess around with it. There's nothing like trying for a month to sell a purchase agreement and having it fall thru because you just couldn't find an investor. ESPECIALLY if it's still owner-occupied.
Trust me... lessons learned the hard way.
well said, and I like your idea of talking to a property management! They definitely do know what their landlords are buying...
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...
Never thought of calling property management companies, that is great advice and I will call tomorrow. You're also right about my "potential" deal that probably isn't...but I sure wanted it to be!!
I really appreciate it.
Katarina
Love the negotiation tactic, it is so simple but sounds so effective, and I'm sure I'll find many ways to use it. I will also give the seller another call like you said, thanks so much!
Katarina
no means 'no today'...
once you figured out your numbers, i.e. your max offer, you have to stick with it, don't give in.
If you have your buyers lined up, you can offer to close in 7 days with cash; there is no way that the owner will be able to do better than that
while the homeowner makes up his mind, don't let that one deal keep you from making other deals, keep moving forward....
Gotcha, and I won't let this stop me, I will keep on moving....thank you
the problem you are having is fundamental, you are dealing with somebody who WANTS to sell his house. What we need are people that HAVE to sell their house, only then you can achieve a win win situation.
Good luck to you!
Thomas
Yes, I think I am starting to get it, we are looking for MOTIVATED sellers. Thanks for reminding me.
Katarina
After repairs there are still 75k of room there with his offer. What do the closed cash transactions look like in that area versus ARV. How long are typically the days on market for homes listed at retail?
Does he have a good loan in place to where you could offer his price but keep the existing loan in place and do some sort of lease option or subject-to?
I am sure this is great advice even though I don't understand all of it.
I actually saw the house with my contractor so I have a pretty good idea of the costs. home listed at retail are selling in 1-2 months. Closed cash transactions mean cash buyers? As for lease option/subject to....i don't know how to do those yet!!
Thank you
Katarina
This is probably not a deal that a landlord would want either. It will probably not cash flow.
The way to tell quickly is to use the "10% Rule"--If a prop is priced @ $260,000, it would have to rent for more than $2,600 in order to cash flow--$235,000 would have to rent for more than $2,350.
He is just not motivated enough.
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
...just because this deal may not go through, the process of what you are doing and learning is invaluable. We've gone through many of these almost deals and still do. We learned along the way and know this is a numbers game. Each no is a step towards that lovely yes.
Keep going and don't let this slow you down. You're on your way to financial freedom and a life that you design!
You know why most people fail? It's because they give up. Have passion, have integrity, and keep doing and keep learning. You'll get there.
"Faith is taking the first step even when you can't see the whole staircase."
~ Martin Luther King, Jr. (1929-1968)
www.beaconinvestorsgroup.com
I think not. You have the seller and apparently a buyers list who can do such a deal? Therefore, the most important factor is you and what is available to bring the deal-- already in hand to closing and close.
Katarina, your numbers dont have the FMV, upon which one or more of your buyers could possibly get a refinance on from their bank(s), giving buyer a good portion of his her money back, and satisfying the $50K in pocket for seller, releasing seller from the burden.
Apparently 50K in seller's pocket is the make me sell factor. Get it for him at a price your buyer can work with.
A buyer who can get unseasoned refinancing may take a good look at this then.
Marvin
Katarina, your numbers dont have the FMV, upon which one or more of your buyers could possibly get a refinance on from their bank(s), giving buyer a good portion of his her money back, and satisfying the $50K in pocket for seller, releasing seller from the burden.
Apparently 50K in seller's pocket is the make me sell factor. Get it for him at a price your buyer can work with.
A buyer who can get unseasoned refinancing may take a good look at this then.
Marvin
Marvin,
I am not totally sure of the difference between ARV and FMV, are they not approximately the same? The ARV is $395000. Also, the buyer who is interested in this one is wanting to fix and flip. I currently don't have a landlord buyer.
Thanks for your help,
Katarina
The way to tell quickly is to use the "10% Rule"--If a prop is priced @ $260,000, it would have to rent for more than $2,600 in order to cash flow--$235,000 would have to rent for more than $2,350.
He is just not motivated enough.
Karen
Karen,
Great advice, I love the 10% rule, so easy!
Appreciate it,
Katarina
Hello, Katarina~
Some deals just aren't smokin' deals. Seek truly motivated sellers: ones where you can solve their urgent problem of unwanted debt or peace of mind.
Remind this seller how you can be his "B" plan. Tell him to keep you in mind for the springtime should he not get his [retail] price. He may call you as a backup plan. Then let this one go. Move on to the next.
With time and circumstance every buyer becomes "motivated."
Remember, there needs to be enough spread in the deal for the wholesaler as well as the wholesale buyer, while helping the seller. Win-win-win. Look for properties that fill your buyers' wants and needs. Then you will be able to "flip" it to them quickly.
Happy Prospering! ~Kat, Liberty Residential Investment Acquisitions
• "To every thing there is a season, & a time to every purpose..." ~Ecclesiastes 3:1-8
• "Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy!" ~Dale Carnegie
• "Begin, be bold, and venture to be wise." ~Horace
• "Never, never, never give up." ~Winston Churchill
• "Whatever you do, or dream you can, begin it. Boldness has genius and power and magic in it." ~Johann Wolfgang von Goethe
if you have a fix/flip buyer willing to pay 265...do it! 5k in your pocket. The buyer would profit around 40k after all was said and done. as long as he can really get 395k!
Don't Wish the Past, Create the Future! - DH
Give time him time try in a couple or months and see has anything change but don't focus on that to much when its plenty of deals out there to focus on that one can cost you 3 or 4 deals that say yes and like DEAN SAY you have to ask the right ?
keep on truck!!!!keep reading!!!!keep finding!!!!keep sharing!!!keep responding!!!keep help keep-up the good work!!! but,don't keep it to yourself!!!
ARV vs. FMV...
I just bumped up this thread. It has Randy's explanation of both.
It's in Real Estate Forums > R/E Investing > Buying Foreclosures, REOs, etc...
> ARV: How It's Calculated in case you miss the bump.
Happy Prospering! ~Kat, Liberty Residential Investment Acquisitions
• "To every thing there is a season, & a time to every purpose..." ~Ecclesiastes 3:1-8
• "Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy!" ~Dale Carnegie
• "Begin, be bold, and venture to be wise." ~Horace
• "Never, never, never give up." ~Winston Churchill
• "Whatever you do, or dream you can, begin it. Boldness has genius and power and magic in it." ~Johann Wolfgang von Goethe
Katarina,
The posts above all have great advise. The one thing I would add is that often times when we don't walk away from a POTENTIAL deal, we can sometimes create one. Here are a few things you might try and keep in mind with future deals:
- correct, you don't have a motivated seller yet, but
- since it sounds like he doesn't have an agent yet...
- do your homework:
----- get GOOD ARV comps
----- tighten up the repair costs for RENT-READY updating and repairs ($60K sounds high)
----- get GOOD rental comps
- then approach the seller with an OPTION; will he sign an option agreement with you until, say "spring" if you were [for instance] to be able to bring him a) a cash buyer at $245K or whatever the figures from homework tells you, and you can EXPLAIN to him and what would HE pay you if you did (you could stand to make money on both sides in this situation, or b) would he sign an option agreement with you until, say "spring" if you were [for instance] bring him a Lease-option "owner/tenant" for say $275K where he would get a a Lease Op with say $10K down and carry paper at 10%-12% with a balloon at 3 years and pay you $XX for putting the deal together.
In these cases you have the possibility of creating a deal, no skin off his nose if you don't perform, you stand to make money by creating this promo piece once and tagging it on all you send out and keep posting and re-posting on CL.
Just a thought. But your homework invested to get the correct numbers first is important.
Great great job stepping up to the plate!
Good luck.
Tina
Never, Never, Never Quit, N3Q
"Nothing happens until you place an offer."
"Skip Deal #1, go straight to Deal #2; it's so much easier."
"There is nothing so useless as doing efficiently that which should not be done at all." — Peter F. Drucker... so, "Don't sweat the small stuff." -R.Carlson. "The greatest mistake you can make in life is to be continually fearing you will make one."~E.Hubbard, The Note Book, 1927...so, Do it for the right reason and "Do it with a headache!" - Dean Graziosi, Weekly Wisdom #176
To everyone who posted in response to Katarina's wholesale deal, WOW; wonderful advice and inspiration. Am just at the beginning stages of my first wholesale deal and am lining up RE agents. Have interviewed 2 and one has come through.
I have read 1 of Deans books and I have to say that a motivated seller is a easier choice to work with. I also agree with those who said leave a "backdoor open" so that if the seller changes his mind, you're there waiting. Good luck!
Denise