Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
9y
Going to cost $170K for a property worth $140K tops... There's a lot better deals out there and no way I'd ever spend 20% above ARV for any property. But I also don't claim to specialize in Multi-Family. So, maybe someone would. No one that I do business with would though. Good luck with whatever you decide!!
Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
9y
Going to cost $170K for a property worth $140K tops... There's a lot better deals out there and no way I'd ever spend 20% above ARV for any property. But I also don't claim to specialize in Multi-Family. So, maybe someone would. No one that I do business with would though. Good luck with whatever you decide!!
Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
9y
What you found is a nightmare. Since it is a fourplex, the value is based on comps and the noi or Cap do not really mean anything. This is a 50's product in a high crime area with poor schools. Of the six pictures 2 are of the outside and one is of trashcans and a vacant lot. Hmm I wonder what the inside might look like. @Jeff Filali has it right. Why would you want to buy at market (1k discount) so you can put 30k into it. Where are they going to get a 95 ltv loan or a 78 ltc on a property in this neighborhood. The only positive I see it that is within an hour of your location.
I would pass and would recommend that you do as well
Investor / Vendor · San Diego, CA · Member since 2016 · 1k+ posts · 949 votes
9y
I second both Jeffs.
Do not buy in high crime neighborhoods unless you can get a super deal - and you are not with those numbers! Even if you do get a 'super good deal' it is very difficult to find renters that can pay rent on time in those areas. Evictions are expensive and a nightmare.
Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
9y
Another thought. C- D properties usually have high turnover. Let's say 50%. With each turnover figure you will lose a months rent. That's $1000. Does the PM take a half of full months rent on lease up. Let's say half, there is 500. Your 1200 a year vacancy budget is gone plus some. If the PM takes a full months rent or they are vacant over a month, your budget is over. Add some vandalism and your 1200 capex is gone along with your 1200 repair budget.
Conroe, TX · Member since 2016 · 9 posts · 2 votes
9y
everything's an assumption, and the numbers looked ok even in 'worst case' ... I assume the numbers would only get better if I could negotiate. I guess I'm confused where I should even start when plugging in numbers in order to analyze. Meaning ... I could have assumed less on the sale price and more on the ARV to make the report look better, but doesn't mean I'll get it. So where does one start ...
Rental Property Investor · Houston, TX · Member since 2014 · 54 posts · 14 votes
9y
Hi Kai, as a starting point, what folks are point out is not to pay more than ARV. ARV is the after repair value. What your chart shows is a property worth $140K AFTER you pay $139K and another $30K in repairs, not to mention the holding costs during repair. End result is a property worth $140K that you have spent over $169K.
Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
9y
@Kai Wong " I could have assumed less on the sale price and more on the ARV to make the report look better"
Kai we don't assume numbers in order to "make the report look better" You are moving in the wrong direction.
Will the real ARV please stand up. Get comps for the area. The broker should be able to get you that. Subtract conservative repair numbers and holding costs. Subtract discount or your profit depending if you are going to hold or flip. Now the number that you are left with is you purchase price. Sellers don't tell you what your price is. You tell them. If they don't agree, you walk. In this case you would also deduct more for the high risk of the area. That is how you determine price.
Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
9y
Typically if someone is going to buy and hold, they want to buy at a discount. Say 20% of the market. So in your example of a market value of 140k, I would want to get a discount of 28k, then another 30k on the repairs. So if this was a decent area your highest offer would be 92K.
Now if you were a flipper your discount or profit would probably be higher depending on holding costs and what you expect as a profit. That is why a flipper needs to get a better price than someone buying and holding.
Houston, TX · Member since 2016 · 103 posts · 33 votes
9y
@Kai Wong First I say thing having grew up in Third Ward. That part of the area isnt worth it, not unless u plan on holding on for a few years. The light rail and TSU/UofH will bring in more money but its gonna be some time. OH and that no-tell across the street is a value killer.