Analyzing a deal
I have a opportunity to purchase a 3br/2ba single family home. The asking price is $67,000 But I offer $58,000. The arv is around $100,000 to $110,000. My banker will require a 10 percent down payment of purchase price and will lend 80 percent of arv value to purchase, rehab. After I inspected the property I've estimated the repairs to be around $8000 to $10000.
Sounds like a good deal! Especially if you get it for that price...
Assuming you're purchase + rehab costs you $68K and your fixed costs are about $15K (15% of resale), you're all in for about $83K. That puts your profit at somewhere in the $17-27K range, which is likely more than 20% of resale value...which is where I like to be.
You could probably even pay a little bit more if you're confident in your rehab and ARV numbers.
Good luck!
JScott after running the numbers if I can get it for $58000 and including rehab I will be in for $68,000. For as resale value my banker recently had appraisal done in the same subdivison a few weeks ago. I was thinking if I can sale it for $110,000 it will be a good deal.
Not only is that a good deal, it is a very good deal. $68k all-in (J used that in his post to include resale/holding costs too, I use it as acquisition plus rehab only) is better than a 70% deal on an exit value between $100k and $200k. I would consider that a triple in this market. With he current competition, I would be willing to pay up to $65k for it (but only if I had to).
Will Barnard- I will find on tomorrow if I'm the highest bidder on this property.I will keep you posted.
I like the numbers and even with all cash these are the numbers I look for getting in at 60% of arv makes me feel real cozy about the deal. when the property and fix and repair cost are under 70% or arv your in good shape. I have a tendency to focus on those properties valued between between 70k and 110k when they are complete and ready for market. I know exactly what your talking about + that market is probably not that different then where I am 550 miles north of you. I like a home that's a 3/2 its a perfect starter home fairly easy to market since the pmt should be under 600 to 700 per mo pmt. Most apts are over 600 a month so it fits 80% of buyers budgets. If buyer cant do 600 to 700 a mo pmt then they probably cant qualify to buy. this type of property fits a lot of lower middle income buyers.
The properties over 130k seems to attract better customers so you will have an easier time qualifying and closing. I like higher returns with smaller amounts of money at risk myself that is why I stay under 100k on most of my deals.
We have a riverwalk, historic district I look for deals in since the homes are classy and close to water. They make great rehabs some of these homes are over 150 years old and can be bought for 40k that will arv around 110 to 130k when complete.