Deal Analysis Requested. Novice looking for advice.
Hello BP,
I've got an offer in on a deal currently that I would like some numbers looked over. If possible. Here's how it breaks down:
It's a 4br/1.5ba in Akron Ohio with 1700 SF
$22,500 Purchase price, offer at $18,500.
$10,000 Rehab Costs (Mostly cosmetic, update bath, some front porch repair)
$1200 Carrying costs for 6 months
$70-75k ARV based on similar but smaller home sales in the neighborhood in the last 4 months (4 sales)
I would be coming at this with all cash. The numbers look great, but any advice would be greatly appreciated.
Also, I'm new to the forums and would like to thank everyone for the warm response! Thanks.
Dave
Dave, I live in akron and rehab homes here. It totally depends where you are buying. What neighborhood is it in? Are you planning to sell it or rent it out?
@Jared Lichtin It's a property that is on the Southern boundary of North Hill. It would be a fix and flip hoping to hit the market in April if everything goes to plan.
I don't know what the market in Akron looks like but your numbers almost seem too good to be true. I would imagine a more realistic rehab cost would be $20-30,000. That would be about $50,000 ready to sell. A profit of $15. Now if you do all the labor yourself the rehab would be considerably less. It just seems that if that deal was really out there with those numbers, it would never have hit any market, it would have been sold before a newbie ever had a chance to see it.
PS. I hope the deal is real and you get it.
@Arlan Potter Akron is a funny market. I would be doing the majority of the work myself, but the house is very solid. I have done two rehabs already, so I'm familiar with materials cost and labor cost in the area. I have a good team established from the first few, so I think that the 10K number is spot on, if not a shade high. Believe me though, I definitely understand the skepticism. The value in the neighborhood is higher than I imagined it was based on those very, very recent sales.
Forgive me, ARV would be in the 60-65k range. Fat fingers.
@David Humphrey it sounds like a winner. When I remodel my rentals, the actual labor is what drives up the rehabs cost. I do hire my rehabs out almost 100% and it is probably at least 2/3 of the total cost.
I just looked online. I am not familiar with this area, but it seems like a lot of inventory, so I would pull more comps to make sure the days on mkt isn't so high. Not really sure who buys around there. But again I'm not familiar with this area. I'm in negotiations on a few houses right now. Pm me and i would be glad to discuss. My last job was a 60k remodel in fairlawn heights.
@David Humphrey: Numbers look great. Only advice I have to include in your analysis is a close review of the average days on market for the sold comparables. Also evaluate an alternative exit strategy & review the rental numbers in the area. Your cash needs for this deal is less than $30K. If the rentals in the area are high enough you may be able to keep it or sell it as a cash flow.
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Real Estate Agent Illinois (#475. 112189)
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- https://www.chicagodiscountproperties.com/
Hey @Crystal Smith . Great suggestion. Alternate "exit" strategy on this property would be to keep it as a rental. A 4/2 rental in that area is rather uncommon so I believe it would be at $800-825 a month.
Don't know that market at all but seems like a home run & if this is your first deal it sounds like a great one because you won't have that much risk out there and you can get your feet wet. After you knock this one out of the park you can look at more expensive homes as you get more comfortable/more capital.
Hey @Tim Gross . Not my first deal, but this is my first since joining BP. My first two were totally no brainer deals with so much room that it was impossible to go wrong. First was a $6,500 purchase, $10,000 rehab, $45,000 ARV and second was a $20k purchase, $15k rehab and an $85k ARV. Done all of this work since May, so it's been a busy year, especially with a full time job and all work performed by myself and fiancee.
@David Humphrey
That is awesome, I did the weekend warrior thing too for a year with my fiance and we did as much as we could too. Working 7 days a week and the weekends being manual labor was a true test of our relationship lol, and we eventually decided to leave our corporate jobs and do this full time. Congrats to you guys for making it through, we always joke if we can do this together with the stress etc. we can do anything and we are actually getting married on Saturday. Best of luck to you, keep us all posted on what you decide to do.
@Tim Gross Sounds like we have a similar story, just no date to tie the knot yet for us. It's definitely a test of patience for both of us.
$70-$75 ARV might be a bit high for the area, you might want to reconsider and be a bit more conservative.
@Mike Walker. Totally agree. I revised it up top to be $60-65. Typo.