Duplex rehab

20 Replies

I am considering this deal for a buy and hold....this is a duplex that needs rehab. Haven't started negotiating price yet, but I know I'll have to get he owner to come down on the asking price. Just wondering what some of you might do to make this a good deal for both myself (the buyer) and the seller.

ARV = $250K
ASK = $160K
Avg Rent in area = $900-1200
Repairs < $55K
3bdrm/1bath 940sqft 

BP'ers...please give me your thoughts, ideas, or suggestions. Thanks very much.....

This looks kinda expensive to me, even before you factor monthly expenses: taxes, water, sewer...etc.  AND  $55k for repairs?  An all cash offer is always a motivator but in this case that still might not be enough make this a good deal for you.

Originally posted by @Donald Patterson :

I am considering this deal for a buy and hold....this is a duplex that needs rehab. Haven't started negotiating price yet, but I know I'll have to get he owner to come down on the asking price. Just wondering what some of you might do to make this a good deal for both myself (the buyer) and the seller.

ARV = $250K
ASK = $160K
Avg Rent in area = $900-1200
Repairs < $55K
3bdrm/1bath 940sqft 

BP'ers...please give me your thoughts, ideas, or suggestions. Thanks very much.....

This deal is a bad one for cash flow.  there are a lot of unknowns based on what you are telling us, but I cannot see a way to get positive cash flow out of this, which makes it HORRIBLE for a buy and hold.  If you could get it for 125-130 and invest 55 into it, you could make some on a fix and flip.  Have you tried the calculators?  They are GREAT at helping you make SMART decisions.  www.biggerpockets.com/calc 

Even if you were able to do a good fix and flip on this...your market will be limited to investors....a discerning crowd of individuals who scrutinize over their numbers. :)

Don't get married to a bad deal. Move on and find a better one.

Kevin

Thanks everyone for your advice, tips, and suggestions. It seems that I would really have to talk owner down quite a bit or just move on. Really appreciate the info. I found the calculators...they are great. Thanks again.

@Donald Patterson  , I agree with @David Kohn   -- this could be pretty sweet if you could get it for no more than about $125K.  If this is an all cash deal, offer them that and tell them that's the highest you can go. Be prepared to walk if the answer is no.  But don't get your heart set on it.  There are other fish in the sea.  Good luck, and let us know how it goes.

I would use the repair number as your negotiating tool. Offer $120k on the spot and have a letter of intent. The owner probably knows how much repair is needed, or they are ignorant of it completely. Worst that can happen is you walk away. $55k is a lot of work to me, it would have to really be worth it.

Do we really have enough info to decide on the value here? If he can get all-in for 200k, and it rents for 1k each unit, then that is 1%. In my market this would not work because of very high taxes, but it may work fine if the taxes are low. 

Thanks again for your input. Trying not to get married to the deal. But I do want to at least try my hand at the negotiating table (120K or less). I am prepared to walk though.

Scott--you mentioned more info to properly decide on value? 

@Donald Patterson  I use this worksheet with every potential deal. It's a great resource you can play around with the numbers to see how they play out.

http://www.biggerpockets.com/files/user/JasonScott...

Most of the broken deals I come across have only a few factors:

1. Asking price is too much.
2. Low rent potential (I'm in the South, where rent in my city averages $500 to $800 per month)
3. High expenses...especially property tax. In our state, investment property is taxed at the same rate as commercial property.  Or there's a lot of deferred maintenance that I  know we'll have to complete because the previous landlord rode the house into the ground and is selling before the big ticket expenses hit.

Use your worksheet and the numbers don't lie.  

Thx,

Kevin

@Donald Patterson  

I like your attitude. Use this as a negotiating practice. Make that low offer, be firm and walk away if the answer is no. The ability to walk away based on your own analysis of a property is empowering and something (hopefully) you'll do many times in your investing careers as you separate the average from the awesome deals.

Kevin.....thanks so much for the worksheet. Fairly easy to understand.....Just what I needed. Thanks again.

I'm in northern Virginia and because of the DC commuter traffic, our rents seem to be a bit higher than even southern Virginia.

Wendy....thanks for the encouragement. I already am prepared to get turned down more often than accepted...but those that are accepted will hopefully be the great (or at least really good) deals that we are all after. Cheers!

@Donald Patterson  My point is that, at least in my area, taxes determine if I can have any cash flow. Most of the duplexes in my area have taxes exceeding $6,000. My duplex rents for $2600/month, and the taxes are $7200! I am able to get cash flow. If the property that you are looking at has very low taxes, I can't see why it would not work.

Oh ok....Thanks Scott. The taxes currently on the property are $1200 per year. I am getting clarification but that is the information I have so far.

What are the taxes?  What kind of area is the property in?

@Donald Patterson 

I currently reside in Stafford. I'm a licensed agent in Virginia and have been doing some research on multi-family properties in the area. If I can be of any assistance with anything let me know, and  I'll do my best!

Originally posted by @Michael Noto :

What are the taxes?  What kind of area is the property in?

 Hi Micheal....form the realtors sheet, the taxes are approximately $1200 per year. The area is on the boundary of a rehabbing neighborhood. Just one block over they are rehabbing and building new. 

Originally posted by @Regis Wells :

@Donald Patterson 

I currently reside in Stafford. I'm a licensed agent in Virginia and have been doing some research on multi-family properties in the area. If I can be of any assistance with anything let me know, and  I'll do my best!

 Hi Regis, Thanks for your offer. While I already have a realtor that I am currently working through, I would not mind discussing and learning from you also. The main thing for me seems to be finding that one or two or three funding avenues so that when I make offers, they are solid and backed with pre-approvals, letters of funds available, etc. Aslo, I've seen (for example) Baltimore has properties for flipping that sell for sub $50K. Would love to find some of that in our area. Thanks...

What are the reasons for the 55K in repairs?  Breaking it all down for the seller will help them understand your offer.  

Originally posted by @Sean Ploskina :

What are the reasons for the 55K in repairs?  Breaking it all down for the seller will help them understand your offer.  

 Thanks Sean....I've got a list just to bring it back to decent rental shape, compliance with modern codes, etc. I will use that also as part of my negotiation.

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