Is this a good Deal?

9 Replies

Hey BP,

There is an opportunity for a distressed property and I am wondering if it is a good deal. It is in East Atlanta on flat shoals road which is a busy road. It is a 3/1 that I would probably covert to a 3/2. Has a big back yard and a partially finished basement. The purchase price is 173.5k and I am estimating around 75k depending on the contractor. Since its a busy road that made me skeptical I pulled comps on the same road. These comps went for 330k but had slightly larger SF. I am thinking I can get 315k for it. Is this a good deal? Should I pull the trigger on this one?

Thanks

Hey Patrick, 

Thanks for the advice. Any particular reason why?

Just by those numbers it *sounds* like an okay deal, but nothing to jump out of your chair for, especially considering you seem a little hesitant with the numbers. Shouldn't your company be able to tell you if it's a good deal or not? Cheers!

I agree with Patrick and Caleb.  Unless it's really aligned to your strategy (which would have to be seeking mediocre returns), you can make better margin elsewhere.  You're going to hang up a ton of cash here for a long time.  Also, you better get all of your permits straight on a main road like that.  

What elements of the deal attracted you to it?  It might help us see where you're coming from.  

Take the 70% of ARV Rule. Purchase Price = (ARV * 70%) - Rehab

So, if you are saying comps are $330K and yours is a little smaller say it would sell for $315K.  

70% of $315K is $220K - $75K you need to buy the house for $145K.  

Don't forget holding costs, buying (taxes, etc), selling, overages, 6-12 mo electricity/water/trash, etc

It may be a tight deal at $173.5K

@Timothy Greene How do you plan on financing the project? Based on what you provided, I would pass or offer $145,000.

@Timothy Greene

Check out this post by J. Scott where he describes how to calculate the maximum purchase price (MPP).  Read his book if you want a full road map for flipping houses.

purchase price is way too high. 

Sure hope you’re not borrowing money. 

You will spend too long on the project with permitting, since you will be adding a bathroom at the minimum. 

Also, networth and new western is famous for over shooting the arv, so it’s probably 280-300k. 

@Patrick Miller  New Western is actually not famous for overshooting anything. Did you have a bad experience after purchasing a property with us? If you have had a bad experience with us then I'd love to talk through it and find out how I can help!

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