Insurance Agent · Las Vegas, NV · Member since 2019 · 158 posts · 80 votes
I came across a deal that I ultimately passed on for a couple of reasons, but I want to know if I am overlooking what could have been a strong deal.
It was a condo, short sell, bank approved price of $105k. Needed some minor repairs, mainly paint and flooring. I budgeted $8k for rehab work. Planned on buying in cash, and the ARV I estimated at $135k.
These condos rent for $1000 a month. Expenses are:
HOA is $110 a month, Insurance $35, PM 8%, taxes $35, and P&I after refinancing $500 ($100k loan). I also included a fixed cost of $50 a month for repairs, and a 5% vacancy. Water/sewage included in HOA.
Cash flow would be about $145 ($1740 a year) a month and total invested would be $15,500 with loan fees, etc, which is an 11% return, not including principle pay down.
Ultimately I didn't end up purchasing the condo because: 1. It was a short sale, and I didnt want to tie money up in an offer for a long period of time in case other deals come up. 2. It was a condo, which apparently don't appreciate much in value
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
You can get reviewed for a short sale typically without putting any money into escrow. No reason typically to put money into escrow if a short sale is not officially approved with an approval letter to close. I think this often will void point 1.
I probably wouldn't buy this deal as I'm not walking into enough equity or a value add opportunity. Condo's do appreciate in the proper location.
I think you will find something you'll walk into more equity on or with better cash flow.
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
You can get reviewed for a short sale typically without putting any money into escrow. No reason typically to put money into escrow if a short sale is not officially approved with an approval letter to close. I think this often will void point 1.
I probably wouldn't buy this deal as I'm not walking into enough equity or a value add opportunity. Condo's do appreciate in the proper location.
I think you will find something you'll walk into more equity on or with better cash flow.
You can get reviewed for a short sale typically without putting any money into escrow. No reason typically to put money into escrow if a short sale is not officially approved with an approval letter to close. I think this often will void point 1.
I probably wouldn't buy this deal as I'm not walking into enough equity or a value add opportunity. Condo's do appreciate in the proper location.
I think you will find something you'll walk into more equity on or with better cash flow.
I appreciate the insight on the shortsale process. I will keep that in mind as I am starting to see a few of them come up. I am surprised by expecting more equity. I know not every deal will be a homerun, but what makes you think there will be more equity opportunities out there? Is that just based on your expectations of this market?
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
@Jacoby Atako with 100k cash you can find opportunities that will make you a lot more than Est. 20k profit on a flip. I know you were planning to do the BRRR strategy it appears. The ROI is good if it was at a larger price point. 10-20% ROI on a smaller deal can get swallowed up by one larger unknown issue. Slim margins even though ROI is good. Cash flow after refinance isn't that good either and you mentioned that you felt it wouldn't have much appreciation to go with the lower cash flow.
I personally wouldn't want to hold a property that barely cash flowed that I didn't think would appreciate well long term, so we are on the same page there.
This is just from my own experience of what I've been able to find over the years for value add or cash flow plays.
Insurance Agent · Las Vegas, NV · Member since 2019 · 158 posts · 80 votes
6y
@Brett Goldsmith
Very new to investing outside my primary home, but I actually have about $200k to invest. My issue is taking the time to find off market deals while still working full time.
I'm in the Las Vegas market so I'm not seeing the cash flow opportunities yet. I may need to partner with someone who has time to find the deals.
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
@Jacoby Atako Yeah, it can be tough to find truly a worthwhile opportunity without the proper deal flow. I think buying short sales can be great. Try to get a few low offers in on properties for review and hopefully at least one can get approved at a great price.
IMO the real money is made when you buy and then in the value add. Appreciation is the icing on the cake if you plan to hold long term.
If you are looking for cash flow plays, may want to look for small multi units to start off ( duplex, triplex, etc )
Real Estate Consultant · Reston, VA · Member since 2012 · 11 posts · 5 votes
6y
Jacoby, I think you need to clearly define your objectives as an investor and let those control your decision making and criteria. Do you just want to make a return of 8-12% and be secured in a relatively safe position as a private lender with a known successful flipper, or do a joint venture with them or do you want to risk your money in a rehab. What you need in this business to avoid big mistakes is a mentor. I would also try and stay close to your home area , say two hour drive so you can go over and watch the progress and learn. Not having a mentor will be a very expensive adventure for many first time investors.