I have a short sale listing priced at $20,000. We have an offer on the table, and the bank is reviewing it. I took a second look at the market for the property, and I have to say the buyer is pretty saavy. He or she has the opportunity to pull in a 100% return on their investment. Let me explain.
There are six properties within a mile of the listing that are considered comparables. Actually an investor would call them ARV (after repair value) comparables. All of the six comparables have the following similarities:
- Prior to the investor purchasing them, they sold for an average of $139,000 between 2002 and 2009. The low price was $91,900 and the high sale price was $168,000.
- They were built in the 1940's and 1950's.
- The investors purchased them for an average price of $42,000 in 2010 and 2011. The low sales price was $35,000 and the high sales price was $50,000.
- The owner occupant buyers purchased the properties this year for an average price of $107,000. The low sales price was $88,000 and the high sales price was $118,000.
- Prior to the owner occupant contract to purchase, the properties were on the market for an average of 77 days.
- Using a conservative estimate of 35% of the investor purchase price for the repairs to the property, I estimate (guesstimate) that the investors spent an average of $23,000 on repairs. A good investor would not go beyond this threshhold if he wanted to make money. And the investor does want to make money.
- Subtracting the difference between what the owner occupant buyer paid minus what the investor minus my estimate for expenses yields and average net profit potential of about $42,000 - a 100% return on investment. Not bad for less than three months work.
Now I have to insert the caveat 'these returns may be unusual and not representative of the entire market' meaning you may lose your assets trying one of the deals, but six different buyers proved that flipping is a viable business in the 30032 Decatur - East Lake market.
Too bad you did not make an offer on my listing...
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