Getting my Feet Wet a little!!!!! But Need Help!!!!

Ok, One thing for sure if they have already answered your question before, there's no real need to ask again. That's ok to word it a different way, though.

What you need is a CMA (comparable market Analysis) done on the property, to determine the real value, not any outside sources because 8 or 9x's outta 10, they aren't reliable ~ Zillow is a good example. Sometimes they're spot on, other times they're not. You also need to be building your buyer's list. Where is your current real estate market? Way to take action, though! It's a start.

My cities real estate market is in a down market.
Do I have my agent do a CMA on the house?

Yes, no matter what the housing market is doing you need Comparative Sales Data.
You must know how much houses are currently retailing for, not just the listing prices.
You cannot determine the ARV (After Repaired Value) of a property without a few recent [retail] SOLD properties of similar size & likeness. IOW, comparing apples to apples.

You can find Comparative Market Data on Trulia.com.
Totalviewrealestate.com is offered here on DG.com (Free) on the open page under: Real Estate Analysis System. FindCompsNow.com (Thank you, Mike!) is a good source, too, to use along with what your agent sends you.
(Read the RE Forums. They are chockfull of helpful info).

You will use the ARV to crunch your numbers to evaluate & determine if there is any profit margin in the deal.
You can look at a property to determine the level of repairs necessary to increase the value of the house and then deduct the estimated cost of repairs from the discounted selling price. You can judge the level of repairs to your exit result and adjust accordingly to what your market is doing. It may or may not be a "deal" if there is not an adequate profit spread.

Here's the formula I use: (ARV X 70%) - Repairs = Buyer's PP (Purchase price)
(ARV X 65%) - Repairs = Wholesaler's Max. PP
Example:
($100K X.70)=$70K minus $20K (Repairs) = $50K BPP
($100K X.65)=$65K minus $20K = $45K <-This would be the maximum price you would pay in order to wholesale it.
If you were the end buyer directly your maximum PP would be the $50K. The concept is to get a deep discount.
If you can negotiate a lower price, then there would be more profit to be made on the back end of the deal either way.

Who should I ask to get information on how much the repairs is going to cost?

You can go into your local Home Depot and ask for most repair estimates. You could also try a local home repair contractor and let them know you are considering purchasing the house and would like an estimate on the repairs.

Do you have a buyer? Does this property meet the buyers requirements? Can the buyer that you are going to assign it to close in the time frame you need?

Good luck with your investing, I hope to hear good news in the future.
Amanda

Thanks that was some big help....Still researching on the house... I asked my realestate agent to send me comps for the house and info in addition to me doing research because I like to be hands on in the whole process to learn... Thanks DG Family...

First ask yourself if you are wholesaling to a flipper or a landlord. You will figure out your offers a little differently for each type of investor.

Flippers are more concerned about what they can profit when they sell it, and landlords are more concerned on either "cashflow" or "cap rate".

When wholesaling to a flipper here is the formula I use:

Foreclosure Comps ARV - Expenses

Expenses include:
1. End buyer's profit (whatever your buyer wants)
2. Your assignment fee (whatever you want)
3. Rehab (don't EVER underestimate the cost of repairs)
4. Realtor commission (6% of ARV)
5. Closing costs (3% of ARV)
6. Seller concessions (3% of ARV)
7. Negotiation wiggle room (3% of ARV)

So if the Foreclosure Comps ARV is 100k,
it needs 20k rehab,
your buyer wants to make 20k,
and you want 5k to wholesale it,
here are the numbers for your offer:

100k - Expenses

MAX OFFER = 40k (I suggest starting lower than 40k and negotiate up to it)

Side note: There are two different types of ARV's, Retail ARV and Foreclosure Comps ARV. When wholesaling you want to always use the Foreclosure Comps ARV. Why? Because why would your buyer buy a deal from you if they can go out and pick up a foreclosure for cheaper? You only should use Retail ARV when you plan on buying the property yourself and flipping it to a Retail buyer.

The math for figuring out your offer for wholesaling to a landlord is a little more complicated, and it would take a long time to try and explain it step by step typed out. But to sum it up, you need to make sure the cashflow and/or cap rate (capitalization rate, google it) meets your buyers requirements. They are less picky about equity because they don't plan on selling the property anytime soon.

Hello DG family,

Here is the deal I 've been reading DG book Your town your real estate profits. I came across Greg Murphy who mastered The LEASE OPTIONS strategy I like this strategy because it's low risk and I have no money no credit. I put out a couple of bandit signs and got some traffic on my phone. A seller called me and said that a real estate agent couldn't sell his house and it's been 90days. I said to the seller well are you still under contract with the agent and he said yes but he is going to take it off the market. I said great because I may be able to help you sell your home faster. I received another call from a women who is looking to rent a home or buy.

I started thinking Hmmmmmm this is a perfect opportunity to do a LEASE OPTION deal. I talked to the seller again and brought the idea up to him about renting to someone with a option to buy and he likes the Idea then I spoke to the tenant buyer and she likes the idea. So, so far I have cooperation with both seller and tenant buyer. I bought some time to next week to gather all the information I can to make this deal work I need forms And guidance from DG family I'm going to meet with the seller Monday I better know what I'm talking about and how to execute HELP!

I think with this deal. I want to lock it up and try to buy it for myself and rent it out for positive cash flow.It has alot of equity in the house where I can use to fix the house up more and rent it out until the market goes back up. I don't have any money and credit, so what actions do I need to make to make this happen?

If you want to buy it and keep it, you'll have to get Hard Money or Private Money to fund the deal. After you buy it, refinance it and pull your money out, then pay back your lender.

Marques:
if you don't have any money, but you've got your eye on this particular house for instance, then you have a few options:

1. Google hard money lenders and the major city you live near and start talking to different hard money lenders (HMLs). Get prices from about 1/2 dozen because by speaking to a number of them, you'll start to drill down on the right questions. Problem is, HMLs almost always want you to have what they call "skin in the game" - how much are you personally putting down or how much of a fee can you put towards them? Now HMLs are great for flipping properties, but if you're going to use one for a buy-and-hold, then how are you going to pay off the HML after the repairs?

2. You can also put up an ad on Craig's List, for example, for the major city you live near and say you're looking for a partner who can put up the money for the purchase or the "skin in the game". 1/2 a pie is better than no pie, I say. Be prepared to split the profits. Maybe at the end of the day for this deal, you'll both just want to sell it and cash out and then you'd have your own money to start your next deal.

3. You can put up a classified ad here on Dean's site seeking a partner. There are a lot of like-minded people here. If you bring them the deal, they will fund it.

4. Check out Craig's List for different contractors and have 3-4 come to the property and prepare bids for you - bids - not estimates. You'll want at least 3-4. Most will come to the property and prepare the bid for free. Make sure they're licensed and check out their license number on your state's contractors' website.

5. Call a Realtor and ask one to prepare a CMA for you - they'll be happy to do it. Problem is, they'll want to represent you in the transaction, and the seller might sell it to you on better terms if he doesn't have to pay a buyer's agent, so DON'T let the agent bring you in the door to see the property. Make arrangements with the seller - otherwise, that agent is now the procuring agent, and you've gotten this far down the road without one. Just get a CMA as a point of departure. Zillow and the like can only do so much.

If you go with HMLs, whether with a partner or not, they don't call it hard money for nothing. You better know exactly what you're doing, do look deep before you leap!

Good luck!
JennyInMalibu

thanks this helped out alot... Still researching on the house.. The agent told me that they are taking bids on getting the roof and ceiling done so that's onething I don't have to worry about or should I take it "as is" to get a cheaper price.... It's worth 103k and asking 78k...