PLEASE HELP ME CLOSE MY FIRST DEAL!

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PLEASE HELP ME CLOSE MY FIRST DEAL!

Camillia W.
Philadelphia, PA · Member since 2016 · 35 posts · 4 votes

Hi there BP community!

 I have a pressing issue that I could really use you guys' as insight on. I have a childhood friend whose mother has a house that she is willing to sell me I'm not sure  which direction  I should approach the situation.  I want to make sure that I present the deal as best as possible:

1200 square foot  

3 bed 1 bath  

located  in up-and-coming West Philadelphia  near the train .  

Built in 1925  

Property Value is around 70Kim

Comps have sold from 120,000K-- 1.5 Mills.

I also work with a Contracting Company and I'm wondering should I get it under contract and put together an exit strategy myself to secure hard money or JV the opportunity. Please help point me in the right direction!

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Natalie KolodijBusiness Member
Moderator
Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
9y

Comps have sold from 120,000K-- 1.5 Mills.

This is so far off. Accurate comps wont have 1.3 million dollars in price difference. 

You need to pull very similar houses, within a mile, similar condition, size, bedrooms, same neighborhood that have sold within 6 months preferably. A realtor should be able to help you pull these. 

Then you need to figure out how much work it will take to get the house to the same condition as those comps. 

Then make an offer based on that. 

So if accurate comps end up being $200k for the house fixed up

but it needs $50k of work

And she wont take any thing under $140k for it

There's no deal there. You need to back into what you can offer for the property to have it be a deal. 

You can also run cash flow analysis to consider if it would be a good option as a rental as well. 

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  • Ryan Cameron
    Investor · Philadelphia, PA · Member since 2014 · 351 posts · 80 votes
    9y

    @Camillia W. Is it 2-story or 3-story? You could break $80-90K ARV, but above $100K is a stretch. The Median Sale price in this zip code is $85K. I'm a little further from Market (62nd and Callowhill) they are 3-story.

    What is you goal?

    Turn the property around, rent out and pull equity out, or

    Fix and Flip

    0Reply
  • Camillia W.
    OP
    Philadelphia, PA · Member since 2016 · 35 posts · 4 votes
    9y

    Since I do not have my own money to fund the deal and not so great credit. I was just thinking fix and flip to borrow from HML and be able to pay back the loan on time. Ideally I would like to hold and rent if it were possible to switch exit strategies at the end if I qualified at that point.

    0Reply
  • Fatima Champagne
    Philadelphia, PA · Member since 2016 · 86 posts · 21 votes
    9y

    This tread is truly insightful. I'm hoping to purchase a triplex for 4plex next year -- I'll be sure to keep these things in mind while searching. 

    0Reply
  • Steven Hellinger
    Rental Property Investor · Warminster, PA · Member since 2016 · 59 posts · 22 votes
    9y
    I am going to be in that area today. I will do a drive by of the neighborhood.
    0Reply
  • Camillia W.
    OP
    Philadelphia, PA · Member since 2016 · 35 posts · 4 votes
    9y

    WOW! thanks alot! @stevenhellinger

    0Reply
  • William Reid
    Investor · Philadelphia, PA · Member since 2016 · 17 posts · 17 votes
    9y

    I live and own in the 19139 zip code.  Overwhelming majority of houses out there need significant rehab.  I live right by 52nd and Market.  I wouldn't necessarily classify the neighborhood as "up and coming" just yet.  That's still a long ways off in my opinion.

    0Reply
  • David Zheng
    Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
    9y

    those above $1 million homes are all north of that city ave. So definitely not comparable.

    As everyone else said, I would probably purchase in the 20-25k range as well

    0Reply
  • Camillia W.
    OP
    Philadelphia, PA · Member since 2016 · 35 posts · 4 votes
    9y
    Originally posted by @David Zheng:

    those above $1 million homes are all north of that city ave. So definitely not comparable.

    As everyone else said, I would probably purchase in the 20-25k range as well

     Thanks David.  I will take that into concideration.

    0Reply
  • Loren Clive
    Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
    9y

    1925 is pretty old. Is it structurally sound? In good shape?

    Repairs can add up quickly when you start tearing down walls. I'd be curious as to the construction/remodel dates on the comps . . . unless all houses in this area were built in the 20s.

    Just because she purchased it for $36k in 1989 doesn't mean it's worth that now, especially if the property hasn't been maintained. 

    1Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    9y

    Just to add a few cents here, what they paid for the property, whether it's 10, 20, 30 years ago doesn't matter if you ask me, what matters is the FMV. We bought a duplex recently for 15K, and one of the neighbors was talking about how in 1984 he bought his for $19K.. so the market determines value.

    The fact it's "as-is" tells you right off it won't pass inspection, so the house can only be sold to investors.. so they're waiting and waiting for someone to take off their hands..  I'd throw a $15-$20K offer and see if they take the bait.. you may be surprised!

    1Reply
  • Steven Hellinger
    Rental Property Investor · Warminster, PA · Member since 2016 · 59 posts · 22 votes
    9y
    I did a drive by of the area. I think the area has a lot of potential. If you can get the property for a really good price I would consider buying it. It would have to be a really good deal to make this work. Best of luck.
    1Reply
  • Evan R.
    Bordentown, NJ · Member since 2015 · 15 posts · 0 votes
    9y

    Great responses.  I would've thought this was a good initially as well.  Helped me learn how important comps are for each area.

    0Reply
  • Camillia W.
    OP
    Philadelphia, PA · Member since 2016 · 35 posts · 4 votes
    9y
    Originally posted by @Steven Hellinger:

    I did a drive by of the area. I think the area has a lot of potential. If you can get the property for a really good price I would consider buying it. It would have to be a really good deal to make this work. Best of luck.

     Thanks alot for your time and effort   

    0Reply
  • Cheryl Daniels
    Homeowner · Philadelphia, PA · Member since 2015 · 70 posts · 24 votes
    9y
    Originally posted by @Camillia W.:

    Wow! I really thought it was worth more...it's weird because she purchased for 36k back in 1989. Now to accept 16 less than what she paid 29 years later, is that a normal scenario in REI?

     Has an appraiser given the value of the home?  Has the home inspection shown that the property needs about 35 to 40K? Could repair etc. come in less than 35K?

    0Reply
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