Was I smart to walk away?
Hello,
I just won a bid on a HUD Home.
Winning bid: $150K
Closing costs: $3.3K
Estimated in repairs: $50K (with margin)
Potential rent: $1,850
Potential resale price: $220K-$240K (at $230K, I'd make $211K after closing costs, according to my realtor)
Rent cashflow: $945.33 or 5.58% Cash on Cash ROI
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I was going to pull money that's allocated to my retirement, currently in stocks (so supposedly growing 6-8%/year) to put into this property and pay for the whole thing cash.
I have multiple part time jobs instead of one full-time, so according to my lender (broker? I probably should know the difference), I can't really get a loan.
This would've been my first investment property, so you can see that this is a nerve wrecking purchase.
The house needed a ton of work (redo two bathrooms -- including moving walls, redo kitchen, siding, etc), but it's literally 3 minutes walk from my home. I'd have to do most of the work myself to stay within the $50K mentioned above. 4-6 months of work.
I had an inspection done without electricity, water, gas. They noticed that the power line has been literally cut off. There's a big black spot behind the electrical meter. Probably a branch fell on the line, but could've been a lightening (less likely).
An electrician said that I'd spend $1,100 to restore power (based on pictures, he didn't go to the site). $2,000 if the problem was more serious, but he didn't think the wiring at the whole house was shot.
So, $1,100 to restore power + $1,000 earnest deposit to HUD only to make sure there were no other unknown issues. If I decided then to pull out, I'd be out $2,500 (including inspection).
I walked away from the deal in the last minute.
I don't necessarily regret my decision, but I want to know if it was the right call or not. I know we make wrong decisions and that's okay as long as we learn from them.
Now, based on the info above. Does it seem reasonable that I walked away or would've been worth to stick with it?
Thank you for taking the time to read through all of this.