I found a property up for auction this week and would welcome advise from experienced investors. Here are the bullet points:
- 3Bed/2Bath (1,164/SF)
- Cash only offers and being sold As is, where is
- last bid $55,000
- Buyer is responsible for escrow ($850-$1,375) and Title ($500-$1,500)
- Comps- $150,000-$135,000
- Currently occupied!
Assumptions: I would assume the ARV to be $130,000 (conservative, I know), $70,000 max purchase price, M&R reserve of 2%, Capital Expenditures Reserve of 3%, 10% vacancy and 180 day hold period.
I have access to private money that could make this financially viable. I could either buy and hold this property (rents would be between $1,200-$1,400) or flip the property.
Is this deal too risky because I'm not able to complete a walk-through of the property to determine the repair costs?
Looks good to me.
Get after it.
Why would you assume the ARV? Do you know any agents that can run some comps for you?
There are formulas to use to determine the viability of flips or long term rentals. Besides using the formulas you have to decide how sure you are of the input on each variable.
I do like scenarios where it makes sense as a flip or long term. Do you have any idea about the condition and cost to fix up to flip. What is the current rent?
Risk comes from lack of information. Only you can decide how much risk you are willing to take.
Can you find out why it's up for auction?
Is there something wrong with the property (structural, roof, etc?)? Is it being auctioned off as part of an estate settlement? Owner is too old and just offloading it?
Use your county records to find out who is the owner and maybe do some research on them.
Most auctions I've been to have a date for interested parties to do a quick walkthrough of the property, even if it has tenants. If the date for that has passed maybe you could contact the auctioneer and ask for a showing?
Justin Whitfield, Upstate SC Properties, LLC
@Michael Roy I live close to the area and I'm familiar with the market. Then I used our county property assessment website to view nearby property values based upon the actual sale price, date and property description (i.e. #beds/Baths/SF)
Oh okay, so it sounds like an informed comparison to me @Joe
Without knowing the repair costs, it's impossible to know if it's a great deal, a money loser or something in-between...
@J Scott that's my concern and hesitation. Thanks
can you determine a worst case rehab number based on exterior viewing, age of house, etc?
@J Scott no noticeable major repairs seem to be needed from the outside. The property is currently occupied.
Is it occupied by renters? If so have the leases been provided?
The buyer may be at least initially getting a buy and hold depending on the remaining time on the lease.
Thank you everyone for your thoughtful input! The auction price has gone beyond the $70,000 I would be willing to risk at this point in my real estate investing life.
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