Deal or no deal?

Question

I have house I'm thinking of investing

Asking 110K

Arv 140K

Owner say they will settle for what they owe on loan 106K

Has long crack in basement foundation wall the pipes on wall bending

Needs cosmetics work new carpet new tile and

Would u close on this?  or you exit strategy?

Jake Thomas · Answer

@Jerry B. even if you took this subject to it doesn't seem like a good deal based on rents.? Those numbers are not very good in my opinion. Don't try to make a deal where no deal exists. This is where having a license would be beneficial. You could offer to list this guys house for $115K. Some retail buyer would think they are getting a good deal, you make 3% commission and seller gets out from under the property.

Just an idea for future ones.

Jerry B. · Answer

Andrew thanks for your reply.

Yes I think I can and would be able to take subject to . Rent is would be around $1050-1150

And no I don't have a budget for the repairs. Would investor buyers be scared of this deal if I try to assign it

Andrew Syrios · Answer

It looks like it will be a wet basement and that's just what it is. I don't see much movement, but you probably want to put vertical braces on that wall and maybe epoxy the crack. The deal looks pretty tight to me. Assuming all your rehab and closing costs came in at $15,000 (do you have a budget for it?) that would mean you would be all in for $121,000. That's only a 14% equity margin. For the 70% rule to work, the price would need to be $87,500.

($140,000 - $15,000) X .07 = $87,500.

That being said, the 70% rule is not a hard and fast rule. Can you subject to it and get in for little down? Will it be a high cash flowing rental? Is it in a fast growing area? Those are things you also need to consider. But if the ARV is $140,000, unless the rehab is really small, I think it's too tight for a flip.