I think I need a picture, a short summary, of exactly what I’m wanting to do with real estate. My husband and I have dreams, but in what order? What importance? Here’s what we know for sure:
Our goals are to create enough savings and income from flips/wholesales to have him quit his corporate job. After that, we’ll work on passive income streams. Our strategy is to direct mail probates and absentee owners, along with bidding on homes from the mls that have long doms, price reductions, or are reo’s.
2010 – Pay off van
2011 – Pay off student loans
2012 – Build savings, be flipping 1 home/month
End of 2012 – Husband quit full-time corporate job
Maybe I should break it down further, but that’s where it is for now. On to the update for today:
-No replies from my craigslist ad for probate leads. I was going to call more realtors when I remembered (hello!) that an investor I know actually mentioned wanting them! I called but he hasn’t returned my phone call.
-I looked up 2 more probate cases and got info. Definitely need to spruce up doc. I should have Aaron look at it, or better yet, send Aaron my doc, and show him a sample doc from Scott Costello’s blog that I like.
-I’m waiting to hear back from J Realtor about my offer on the house on 32nd st. No word.
-Spoke with K realtor about putting in two offers on houses: 24th st. and 40th. They’re low, but we’ll see! She sent me the paperwork today. I’m so glad I don’t have to sit down to actually write up those offers! She emailed me the docs, I’ll sign and fax back. LOVE it.
-I’m supposed to send 2 probate letters before next week. Hmm…I wonder why I haven’t done anything toward that? Maybe b/c that’s the scariest part…doing something that might get me a call!
Working on the comps for the 24th and 40th st houses today, I found something interesting. The K realtor sent me her comps, and (since I’d never seen mls comps before) I began looking through and noticed that they’re all like-kind properties (roughly same sf, beds, bath, hvac, frame, etc.). So, I averaged out those properties and called that number/square foot the as-is/current market price for homes that are in okay condition.
Then I went over to the assessor’s website and looked up every single sale in the subdivision. I found three categories of figures: high, really low, medium. The medium price/sq ft was the exact same as the comps I was given. The high ones were nearly all rehabbed (I think this is right since the current owners are owner occupants and the owners who sold it were mostly investment entities). The low one were all investors scooping up deals (several bank-owned).
Those figures made me wonder…could these figures be my ARV, current value and investor’s value?
For the NW 40th st house I used the high figures ($69/sqft) to figure ARV, which gave me $96,000. I used the middle range/mls comps for the as-is current market value, which gave me $84,000. Then I used the low figures to get my offer, which was $40,000.
To sum up:
ARV (After Repair Value) = $69/sqft = 96,000
Current Market Value = $60/sqft = 84,000
Investor’s price = $29/sqft = $40,000
Then I tested it:
Method 1: Use the formula ARV x 70% – Repairs – Profit = Max Offer.
ARV looking at comps that were completely rehabbed (central air, new windows, exterior paint, etc.) came in at $69/sqft to give me $96,000.
Repairs were calculated as $10 x the square footage (and I included the garage apt not part of the sq ft), plus about $6000 since almost all the older homes would need re-wiring. Total: $23,000 (cushion!)
$96,000 x 70% – $23,000 – $3,000 = $41,000
CHECK! It confirms my theory!
Method 2: Offer half the current market value
Using the realtor’s comps, I came up with a current, as-is value of $84,000 (assuming it doesn’t need anything major – if he accepts our offer, then we’ll go take a look. If it’s serious, we’ll negotiate!).
$84,000 x 1/2 = $42,000
Maybe I’m wrong, but it feels really good to get any confirmation (from two methods) that I’m not way off in my offer. If I end up in trouble b/c of one of these deals, then I’ll know for sure.