First Deal - Need Help With Numbers

First Deal - Need Help With Numbers

Hi Everyone,
Been a while since I have been onsite. I have been desperately trying to complete a first deal. Got to a down point,but thanks to a very helpful seasoned investor from this site,I got back on track and it seems like some things are starting to happen.
I took Dean's advice & got an 800# from COA.One of my extensions is about me buying houses.I posted an ad on Craigslist about buying houses and gave the 800# extension with my recorded message.Yippee!Someone actually called about a property they want to sell!It is another investor and I contacted her to get as much info as possible so I could do my due diligence.
Forgive this long post,but Anita recommends that we provide as much info as possible.
The REI purchased the property in 2005 for $32K.A total rehab was done and she spent about $45K on it.She is not looking to make anything on the sale,but she would like to get back what she put in so she is looking for at least $70-75K 'cause she needs cash.
This is what she did in the property:
Exterior:installed new windows,new water line under ground (water pressure was low and there was a leak,repaired broken bricks on the porch,installed exterior latern and mailbox on the front,installed sensor light and replaced/painted wooden fence in back.
Interior:upgraded breaker box to 110 amps and upgraded electric with new wires.Installed recess lighting in living room,kitchen and basement.Removed the wall separating the litchen from the dining room to create openess.Kitchen was gutted and installed oak cabinets, nickel ceiling fan,backsplash,microwave,oven,dishwasher, refridgerator,garbage disposal and stainless sink in addition to an island with countertop matching regular countertops.Drywalled the basement and installed wall to wall carpet.Painted laudry room and installed new sump pump,utility tub,and screen door.The washer and dryer was existing when she purchased.Sanded and finished hardwood floors throughout the house.Gutted bathroom and installed new vanity,tub,fixtures and nickel bathroom accesories. Installed tile on the bathroom walls and floor.New plumbing in bathroom and throughout the house (PVC).
There is already a tenant in place since July 2009 paying $950 per month.Tenant has a voucher with a disability program,not section 8.The Voucher program inspects every 3-4 months to ensure tenant is taking care of property. Tenant desires to stay in property since it took her 2 years to find the right place.
These properties sold on the same street (different block, but same townhomes) in 2009as follows:
3542 - 12/2009 - $119K /3549 - 11/2009 - $128,500K
3550 - 11/2009 - $126K /3553 - 12/2009 - $119K
3424 - 02/2010 - $120K
Rental rates range from $800 - $1250 as reasonable for a 2 bedroom center unit.
It is a 2 story,2BR,1BA,a sitting room,living room,dining room,finished basement.
I want to wholesale the property.Doesn't appear to be any rehab needed.Tenant is already in place with guaranteed monthly rental payments providing a passive income of $11,400 @ current rent,but could go up to $15K a yr.
I want to lock up contract with owner for $75K cash and make at least $5K on wholesale deal. Am I on track or selling myself short? Is $120K a fair wholesale price?

Please respond quickly as I don't want to hold up the owner.




Always striving to move forward toward better times!

Verna (newage8767)

Verna It sounds like you

Verna It sounds like you found your first deal.Congrats!!My only question is,why do you need to wholesale it for $120,000 to make $5,000.You can whole sale it for $80,000 and make $5,000 or $85,000 and make $10,000 which isn't leaving a investor allot of equity.You would need a homebuyer (occupant) to sell at that price and it still might be hard to do right now.I say whole sale it for $80,000 and have your first deal under your belt.your on your of luck


"Every failure brings with it the seed of an equivalent success"
Napoleon Hill


Mike - Did I miss something!?


Thanks for the encouragement!

You had me totally confused, but I think I finally got it. Make an offer to the REI/owner for $75K (she gets what she wants, then wholesale it to the end buyer for $85K. End buyer picks up the contract for $85K of that he pays the seller $75K and me $10K. The end buyer right off the bat gets a $950 per month (or $11,400K per year)positive cash flow. And since he can still get $25-$35K equity out of the deal should he decide to sell it later.

Another problem I have is there doesn't seem to be an escape clause for me if I need to get out of the deal. The house has already been totally rehab so I don't think the inspection clause will fly. Any suggestions on that.



Always striving to move forward toward better times!

Verna (newage8767)

Hey Newage

One escape clause is "Contingent upon partner’s approval". Anyone could be your partner. They could not approve because of a sex offender living 2 blocks away, the color of the carpet, etc. It's a broad escape clause if they will accept it and it usually sails under the radar.

The numbers are really a lot easier then it seems.

I use price per square foot in comps but we can use what you have up.

Average price of comps you gave is $122,500. (add all the sales prices up and divide by the number of homes on your comp list (5))Subtract 10% = $110,250 This should be your sale price. Having a home listed 10% or more lower than everything else makes it more attractive even before anyone actually sees the home.

Multiply your sale price times 68% = $74,970
Subtract your holding costs (I always do 3 months. If I sell it sooner it is more profit!) That is what you should offer on the house. If you are close to this range you will do well. Don't panic if they don't accept your offer. I recently walked away from what everyone was telling me was a good deal but it didn't fit my criteria. So I walked away from the table. Two months later they called and said if I am still interested they would take my last bid. Nice.

I have a purchase analysis form I use for the details but this is basic and works.

I like the way you think. You're doing great. Getting that first deal under your belt is an amazing feeling. Personally I would rather get some money out quicker than holding for any period of time. But that is just me, at least for now.


"Faith is taking the first step even when you can't see the whole staircase."

~ Martin Luther King, Jr. (1929-1968)

Good Deal

Congratulation on getting closure to your first deal. I had email an offer to the listing agent of an REO,this is my first offer. Inspire by new DG Your Town book Joe Jurek's deal #4. I kind of borrow a little of the wording asking for 100% financing+10k for fix up just like he did. I even have a renters wanting to rent in this area. They have another offer on the table too so I might not get this one but to even make an offer is wonderful. First offer is very important!


coco d.