Seeking advise on first investment property (Rental/Flip)

8 Replies

Hey guys! I am new to bigger pockets and would like to get some advise on my first potential investment property. The house is currently foreclosed and owned by the VA. Property is being sold "as-is" with the right to inspect. Seller will make no repairs and VA does not pay for or warrant title.

The house is in need of some repairs. I am looking to do most of the minor work myself (paint, flooring, etc). My goal is to live in the property for one year while I put in the sweat equity and outsource some of the work that I will not be able to manage. The house does have a pool that I would like to fill with dirt in order to eliminate the pool. Let me know if you have any better suggestions. 

I am leaning towards a convention/hard money lender as the house will not pass inspection and will not be approved by FHA. The plan is to buy title insurance and have a title company do a title search to make sure there aren't any issues/liens on the title.

Please see below pictures and info on the house. I appreciate any advise as this will be my first purchase and I could use a lot of help. What do you guys think would be a good offer price to make this a good deal?

3/2 1,778 sqft. SFR Built in 1966

Asking Price: $105,000

ARV: $180,000 - $190,000

Comps in the area sold in the last 3 months between $185,000 - $194,000

Down Payment:$5,250 (5%)

Estimated repairs: $30,000?

Estimated rental income: $1250- $1350/ per month (based on rentals in the area and rentometer)

Estimated Monthly Cost: $480 (P&I), $84 PMI, $70 home insurance, $200 Taxes.

Repairs needed:

Roof will need to be replaced

Pool filled

Floors need to be refinished and will need new floors in some areas

Drywall damage in the walls in a few places

Lighting Fixtures

Interior Paint (whole house will need to be painted)

Bathrooms will need to be updated

Kitchen will need to be updated (cabinets can be refinished)

AC was replaced in 2013 Indoor/Outdoor 

@Zoran Domazet If you're confident in your numbers and the ARV, then pay what you think is best, if you feel $105 is reasonable and there is competition, pay asking or more, otherwise offer what you think is reasonable and based on the kind of return you need.

What are you using to get a 5% down? You said that it would not be approved by FHA. If you are using hard money loan you need to factor in the points and interest of that loan, which I don't see in your calculations. Does this house qualify for conventional loan?

Costs you're missing:

1. Monthly capex

2. Monthly maintenance (Since you're the owner instead of renting you're responsible for repairs)

3. Closing costs 

4. Loan fees and points


What's your exit strategy? Refinance, hold, or sell? You don't make that entirely clear as well. 

@Aaron Yang I might be able to pull it off with an FHA loan but I am also open to other lending options (conventional loan). I've got a pre approval from my lender yesterday and he's confident we will be able to move forward with a government loan. My concern is that I am competing against all cash buyers and since this is REO that I will be at a disadvantage due to my financial contingencies.

My exit strategy is to refinance and use the funds to purchase another property. If the market turns I am planning on holding and renting out until things level out. Please see below analysis of the property. Any feedback is appreciate!

CapEx and repair est are on the lower end due to the rehab that will be done before the property is rented out.

@Zoran Domazet

Hey Zoran,

In terms of Material costs I understand the need for flooring in some areas but to be honest looking at the pictures it may be better to replace them throughout. I am not sure where you have allocated budget in terms of Painting / Other materials but I feel the budget you’ve allowed is a stretch given the size of the property and I feel you can stay under that and still replace those floors.

However best to get a contractor to give it the once over as you discussed to get a quote together, looks like you are on the right track.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here