My deal - I want your opinion

4 Replies

Please understand I am still negotiating details, have no contract and therefore I can't provide the properties location and some known specifics so it will be a little vague. Ask and Ill try to clarify or expand for you.

Sellers goal:

Obtain a specific $ amount and get out of the property. When we finally met he gave me the exact amount I wanted to be at, which is about 49% of its ARV.

My goal:

Use no money of my own to achieve sellers goal. Refi the property as soon as I can.

Property details:

Multi Family - 2 unit
3/1 - 2/1
Depressed neighborhood
Fully rented (under performing significantly)(income: 900/mnth for both units)
Post tax, Post expense cash flow of only ~59$ a unit :(
Needs about 15k$ in renovations. 



Potential deal details:

No down Payment
5yr to get refi
Flexible on monthly payment amount. (He has a small mortgage left on prop, Less than 5k?)
I estimate its ARV will be 70-75% of its low market value


A couple questions:
How would you treat current renters? (respectfully)
-Notify of rent increases and permit to vacate peacefully?
-Keep initially but notify rates will increase in X time frame
-This is in NYS, does that damned new law restrict me in this?
-Other option

Based on my goal 
-Would you feel comfortable with these margins
-Does 49% of ARV *generally* fall into the "good deal" category if repairs would leave you with about 25% equity in the property after investment? Is that a clear question?

What might you suggest in the deal which I may not be considering?
Would you walk away from this? Why?


This is the before and after analysis from Deal checker and I included the Zillow price estimate as a general guide, I understand appraisals and Realtor comps. I would say that spread is accurate and would error on the low/mid. 55-65k range


Thanks to anyone who gives me their opinion. It is greatly appreciated!

Michael,

While the property might be inexpensive to purchase, it also is in an area that has low rents. If the seller is selling, it's because they're losing money. When the property experiences maintenance expenses such as a failed water heater, roof replacement, or a broken window, or needs repainting, there isn't enough rental income to fund the repairs, even if you double the rents. A failed water heater will cost the same to repair in an A-class apartment as in a C-class apartment. These types of repairs are normal. Most low income landlords underestimate the true expenses. I've been a landlord in New York state before and it was not a pleasant experience. The new rules will only make it worse. It sounds like you're trying to buy a property with little to no cash. Perhaps you don't have a lot of cash. What you're missing is the skill to raise capital. That's far more important than the cash. I believe you're better off surrounding yourself with the people who have developed the skills to raise money. Once you have that skill, you can much more easily acquire the properties that you really want to own and that spill cash flow. 

Trim margins, uncertain market. I feel that this may give you a bit of headaches trying to stabilize.

-Bjorik

I am seriously considering the advice and opinions both of you have provided me with and greatly appreciate you taking the time to do this.

In no way am I committed to this transaction. But at the same time I won't just toss it in and walk away immediately. 


With that in mind though can either of you suggest the types of people/organizations more suited to entering into this particular situation who I could reach out to? (Am I permitted to ask that question here? I'll rephrase this if not).

Regardless, I have asked a person/friend who owns a significant amount of similar properties in the area to give me a second opinion.

Thank you both so much!

Originally posted by @Micheal P Kloppel :

I am seriously considering the advice and opinions both of you have provided me with and greatly appreciate you taking the time to do this.

In no way am I committed to this transaction. But at the same time I won't just toss it in and walk away immediately. 


With that in mind though can either of you suggest the types of people/organizations more suited to entering into this particular situation who I could reach out to? (Am I permitted to ask that question here? I'll rephrase this if not).

Regardless, I have asked a person/friend who owns a significant amount of similar properties in the area to give me a second opinion.

Thank you both so much!

If this seller is will to make a deal at 49% of ARV and most people look for 70% ARV when purchasing, you could try to wholesale the property.