Need help with some deal analyzing.

6 Replies

Hello guys, I am in talks with a property owner who wants to sell. This is going to be a Wholesale deal. 

Disclosure: I'm off to a super beginner start so I may have screwed up or don't have enough information so I hope I can get some advice.

The property is a condo.

Purchase/ Asking Price is $100,000 (This is not negotiated yet)

1 Unit - 1 Tenant - Currently paying $1000 Per Month

2 Bed

1 Bath

Basement with Washer/Dryer.

The Owner is Out of State.

In addition I am trying to find out the Market Cap Rate in the area. How do I go about finding that quickly. I know how to find the property Cap Rate, just need the Market Cap Rate. I also need the typical cost of things like Lights, Gas, Water. I didn't ask, I was so nervous but I can ask in my follow up.

Lastly, if this is a deal. When I talk to the Seller, how do I arrange for him to assign a contract? I got permission to look at the property but if there is a Tenant I don't know how to look at the property. My heads spinning, please help.  Thanks.

I don't know much about wholesaling...in fact I know very little other than the basis -- you buy the property at a discount, and assign the sale to someone else, and the difference is the "fee" you get.

With that in mind, the numbers need to make sense for an investor, and for you.

For an investor, is this property UNDER-market rate rent? It hits the 1% mark, but is it truly a good deal for an investor? What is their return for buying from you, at say, 120,000? After this person pays their debt service, taxes, insurance, sets money aside for CAPEX, vacancy, maintenance...will they make money?

And for you, what are the comps in this area? If 100k is the high price, then why would an investor pay 120k to you?

@Joe P. Exactly. The 100, 000 is the asking price, i'm not going to assign it for that but I do see what your saying. IT has to make sense. 

I can figure gas, elec, and water but I don't know how much insurance cost here.

I also didn't ask for the HOA but I think its 150.

Originally posted by @Nathaniel M Cooper :

@Joe Papp Exactly. The 100, 000 is the asking price, i'm not going to assign it for that but I do see what your saying. IT has to make sense. 

I can figure gas, elec, and water but I don't know how much insurance cost here.

I also didn't ask for the HOA but I think its 150.

I would never turn someone against a deal, so what I would say is do the due diligence and find out EVERY possible cost, and find out the best possible price to sell. Doing the homework will tell you if this makes sense for anyone.

@Nathaniel M Cooper You'll want to obtain a contract from an attorney.  You'll need advise and counsel from offer to closing.

You'll definitely want to figure out the price of the condo from other similar condos (comparables). You should be able to ask the owner about the extra costs (utilities, HOAs, insurance, etc.). You can attempt to verify all of this by contacting the providers (water/gas/electric, insurance company, HOA representatives, etc.).

Also, make sure you have a couple of potential buyers lined up.  You don't want lose your earnest money if you don't have a buyer after signing the contract.