Expensive First House. Buy or Not?
Hello!
I am looking at buying a house, and it is on the expensive side when I ran the numbers. Right now it is $300,000, 2 beds and 1 bath in Orem Utah. It is a little old, and some new floors and a window or two will have to be put in, so a little repair is needed. Without looking at the price, this is what I am looking for: a residential home that needs a little bit of work to apply the BRRRR method.
When I look at the house, down the road I can picture a small ADU in the back and a finished basement added on to the main house. This can add two or three more rooms, making the numbers look a lot better. So the question I have is: Should I buy this home with the potential that I see? I don't want this to be a purchase solely based on emotion (although I do think it is pretty cool), or bad numbers/estimates on my side.
Any tips and tricks would be greatly appreciated!
I would be careful, especially if this is your first investment property. I would always purchase based on the numbers, and make sure you have multiple exit strategies in mind. Maybe look at purchasing as a primary residence with an FHA loan, and house hack if possible.
Quote from @Jonathan Bonin:Hi Jonathan,
Hello!
I am looking at buying a house, and it is on the expensive side when I ran the numbers. Right now it is $300,000, 2 beds and 1 bath in Orem Utah. It is a little old, and some new floors and a window or two will have to be put in, so a little repair is needed. Without looking at the price, this is what I am looking for: a residential home that needs a little bit of work to apply the BRRRR method.
When I look at the house, down the road I can picture a small ADU in the back and a finished basement added on to the main house. This can add two or three more rooms, making the numbers look a lot better. So the question I have is: Should I buy this home with the potential that I see? I don't want this to be a purchase solely based on emotion (although I do think it is pretty cool), or bad numbers/estimates on my side.
Any tips and tricks would be greatly appreciated!
I agree always go off the numbers. Even if you can up the value the numbers have to make sense. I’d need to know more about the house to tell if the price is too high. Let me know if you like a second opinion on the house. I live in Orem and have my entire life so I should be able to give you a decent estimate.
I agree with the posters already: BUY ON THE NUMBERS NOW, NOT WHAT THEY COULD BE. I too am an investor / agent in Orem. Feel free to reach out if you'd like to talk.
I just ran the numbers using the BRRRR Calculator (estimated a couple of numbers) and it doesn't look good (-80% ROI in the first year -60% in the second). I am not a pro yet, else I would share the pdf.
When I ran the numbers in my own excel sheet, the numbers were a bit different. It had a better outcome, but still bleak.
Long story short, it seems like it is better to buy a good (profitable) deal right of the bat rather than build it (through construction) into a good deal.
Thanks for the input!
I got a property in Orem last year as a first house. At 3% interest rate and a little over 5% down it cashflows fantastic. Plus the appreciation over the last year is already at +16%. I have been able to take some of that equity and put it towards another downpayment while also leaving a cushion with the remaining inflation to not become over leveraged. Just have to search for the deal.
Quote from @Jonathan Bonin:Not. No cash flow isn’t a money making strategy.
Hello!
I am looking at buying a house, and it is on the expensive side when I ran the numbers. Right now it is $300,000, 2 beds and 1 bath in Orem Utah. It is a little old, and some new floors and a window or two will have to be put in, so a little repair is needed. Without looking at the price, this is what I am looking for: a residential home that needs a little bit of work to apply the BRRRR method.
When I look at the house, down the road I can picture a small ADU in the back and a finished basement added on to the main house. This can add two or three more rooms, making the numbers look a lot better. So the question I have is: Should I buy this home with the potential that I see? I don't want this to be a purchase solely based on emotion (although I do think it is pretty cool), or bad numbers/estimates on my side.
Any tips and tricks would be greatly appreciated!
Quote from @Jonathan Bonin:
I just ran the numbers using the BRRRR Calculator (estimated a couple of numbers) and it doesn't look good (-80% ROI in the first year -60% in the second). I am not a pro yet, else I would share the pdf.
When I ran the numbers in my own excel sheet, the numbers were a bit different. It had a better outcome, but still bleak.
Long story short, it seems like it is better to buy a good (profitable) deal right of the bat rather than build it (through construction) into a good deal.
Thanks for the input!
It is unlikely you’ll find anything your area that will cash flow. Trust me, I’ve looked.
You’ll need to invest out of state to cash flow.