Second Deal, Gut Check

[Kenneth Shultz]

Hey guys, 

This is my first post on BiggerPockets, and I'm very excited about this website and this industry. I started a company with my brother in Richmond, Virginia. We picked up our first property for $55k, plan for $30k in rehab. It's 3 bed/2 bath that should rent for $1,100 when complete. We hope to refi, cash-out and do it all again soon.

We are looking into a second deal now, and I wanted to get a gut check here on our thoughts. This is the property: http://www.trulia.com/property/3231048825-220-W-31...

It is a duplex, listed for just shy of $170k. It's marketed as 'turn key' rental (currently has tenants). I don't consider this property worth anything close to $170k. I see a house built in 1975 that will need a new roof soon, and likely new plumbing and electrical at some point too. There is no central HVAC. 

Other than that, the house appears to be in great condition. Our plan is to duct the unit and add heat pumps, replace roof, and update plumbing and electric, as needed. Our budget for this is assumed to be $30k. For this to be a successful BRRRR, the numbers that make sense to me are:

$80k purchase price + closing costs

$30k renovation

$110k total invested

$160k after repair value -> $110k cashout refi

Rent for each unit would perform at around $800 / month - $900 / month.

Basically, my numbers tell me the current asking price is a non-starter. And an $80k offer would likely get no response from the seller whatsoever.

What do you think? Should I let it be, move on? Should I approach the seller? Are my quick calcs accurate, or way off? Just looking for some feedback from some folks with more experience in this realm.

Thank you!

-Kenny

[Brent Coombs]

@Kenneth Shultz, if you're hoping to fully cash out the first one, I take it that you expect it to appraise at an ARV of $122k+? If true, and it still cash flows despite the refi loan, then why WOULDN'T you buy every one you can find for this sort of discount?!...

I doubt that the Seller of this second one will drop their price by $90k, but, strange things happen!