Engineer · Stratford, CT · Member since 2015 · 22 posts · 4 votes
Hey all,
Looking for some help. This is my first property, and i am having a hard time understanding the numbers.
Reo for 218k
I want to offer 170k, this is a 203k with estimated 50k in repairs. i am asking seller (bank) to cover closing cost. Arv is 240k. After repairs i would like 10k in equity, that is why i am offering 70% of value. I know this property will cash flow, but dont want to pay more then the value of the market value. i will be holding and renting this property. Can some one please explain the breakdown below? Also, i am not sure if this is legal or ethical to post, it does not contain personal information, but if this shouldnt be posted please advise so i can delete.
Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
10y
lol. Yeah they are. I was focused on the numbers. What's the market rent for this property in the area?
Just out of curiosity, why would you go this route? You are basically buying retail and renting it out, but you are having to take the risk of rehabbing this property. If you aren't wanting to buy wholesale, then just buy a turnkey rental.
Engineer · Stratford, CT · Member since 2015 · 22 posts · 4 votes
10y
Thank you all for you input. My offer is submitted. I will keep in all updated with the results. Crossing my fingers, if my offer is accepted I will start a new post documenting start to finish my 203k process, successes, and failures.
Buy and Hold Investor · Nashville, TN · Member since 2013 · 264 posts · 102 votes
10y
Man, good for you for jumping in and trying to find a deal!
That said, you have a LOT to learn (we all do, but I'm pretty concerned with your knowledge level currently). You don't even mention in the original post that this property is essentially going to be an owner-occupied quad with ~3k GRM. That's unbelievably critical information.
You say in the first sentence of the OP that you don't understand the numbers. That's bad. I mean, it's never bad not to know something, but investing where you don't understand is a recipe for disaster. I would work hard on understanding (1) market rents in your area, (2) how different varieties of conventional financing work (and which are available to you), and (3) how to calculate your monthly cashflow. Even if this offer is accepted you'll have 60 days before it closes, so I'd get to reading/listening/asking questions about all of this stuff immediately. Your first deal needs to be a really good one, since you have small reserves, few contacts, and less knowledge than you will for every deal going forward.
Engineer · Stratford, CT · Member since 2015 · 22 posts · 4 votes
10y
@JT Spangler I appreciate the feedback. The more critical the better. I will say that my original point of the post was to decipher my brokers loan paperwork. After all this was the first time I have ever seen this document. I did not add all the details purposefully so the attention wasn't drawn away from that, and I didn't have the property under contract yet.. Man did that back fire. O well, lesson learned there. Adding the info later on didn't help either.
The learning will never stop. However the defined rules and strategies don't always fit like a cookie cutter. I use them as a base, and hope to find a deal that fits, but also try to find new "deals" that don't fit into the cookie cutter win all scenario. I am trying to be creative and make my own deals.
I have learned a lot from this post, and that's the most important thing. Hopefully I can be successful with my strategy and help others define new ways and strategies that make sense as well.
All in all, it is the harsh feedback that is most impactful and memorable. So once again thanks for the input, and I encourage everyone to follow and learn from hopefully a good strategy or an expensive disaster they won't have to pay to learn as well.