URGENT! Listing tomorrow. Help me look at THIS property deal

10 Replies

I'm considering this property as a possible flip but am new to pretty much everything having to do with REI and flipping. Here is what I know. Which on this deal is not much. My thought would be to vet the deal asap and make the first offer.

Here is the property: http://www.zillow.com/homedetails/1061-Warwick-Ave...

  • It is being listed at $55,000 on 6/23 by the bank. 
  • Rehab cost unknown
  • ARV possibly $80-90,000 based on comps. But I'm not 100% on this number.

Any help would be amazing. Thoughts, comments, ideas. Does this sound like a deal that could work? My goal would be to flip this home and use the profit as a down for a buy/hold property. 

Thanks in advance.

You need to add a lot more info into this thread in order to evaluate the deal. 

What are holding costs? Selling Costs? You absolutely must know at a minimum a ballpark for the rehab? What is the scope of work? Financing? Holding costs? etc.

Just looking at the spread initially, I think you could possibly lose money on this deal.

You need to come up with an estimate for the rehab costs and base your offer on that, as well as closing costs and holding costs.  Can you get into the house?  

@Garrett Diegel

No offense but from this post alone it seems you are far from ready to pull off a successful flip. I would recommend acquiring more knowledge before you jump in. Either that or JV (joint venture) with another investor for your first flip. Also, check out J Scotts The Book on Flipping Houses.

A lot of new investors will lose on their first flip. Do not be one of them!

It's going on their auction site, not "being listed".  You have no idea what their reserve is.

Originally posted by @Micah Copeland :

@Garrett Diegel

No offense but from this post alone it seems you are far from ready to pull off a successful flip. I would recommend acquiring more knowledge before you jump in. Either that or JV (joint venture) with another investor for your first flip. Also, check out J Scotts The Book on Flipping Houses.

A lot of new investors will lose on their first flip. Do not be one of them!

 Micah, I would have to agree but there is no better way to get education than to ask questions on a site like this. 

Originally posted by @Wayne Brooks :

It's going on their auction site, not "being listed".  You have no idea what their reserve is.

 Wayne, 

On the link it shows as auction but it is actually being listed tomorrow. I contacted and spoke with the listing agent for the bank.

It looks tight on first glance. If you took your ARV minus realtor's commission when you sell minus your desired profit, how much is left to cover the below? With an example of 85k ARV, 6% commission and 20k desired profit, you've got $4900 left to cover the rehab and all other costs. Might not work out too well :)

  • title policy on sell
  • finance charges (points and interest)
  • finance fees (legal, document fees, etc)
  • utilities
  • insurance
  • property taxes
  • rehab

@Garrett Diegel

I agree completely! Feel free to reach out to me if you ever have any questions. If I know the answer I will gladly tell you!

Just the fact that this is a bank owned house and there is a listing agent involved tells me there is something significantly wrong with the house. Now days by the time a house has gotten to this point and has been assigned to an agent to sell means the bank wants to get as much as possible for the house otherwise what would be in it for the listing agent?

If there was not much wrong with the house the bank would be listing at near market value or possible right at market value. There is not much of a spread between asking price and ARV, that already throws up a red flag for me.

You never want to consider buying a house unless you have very reliable figures on the repair cost and holding time. 

Have you considered closing costs, property insurance or any other potential or real costs knowing those costs need to be subtracted from your spread.

Don't be in a hurry. Do you have any relationship with a reliable General building contractor who can accompany you to the house and prepare repair cost estimates?

Really search out what is available that you can get into for $55,000.00 you might even find a house with an ARV of $120K in your market. That might make allot more sense to look into.

There is so much that could be said but at minimum your want to have all the needed figures and they must be current and very very reliable.

Without knowing any of the real figures this is what I see as a potential with a house priced at $55,000.00 with a ARV of Of $90,000.00 ( best case scenario)

Purchase price, escrow fees, insurance, and repairs - $79,000.00

Then you will pay an agent to sell it . $90,000.00 - 6% = $84,600.00 less possible seller's closing cost but even without this you have $84,600.00 - $79,000.00 = $5,600

I am not saying this will be the case. It could be slightly more or slightly less just for starters without using real figures. In a case like this you might even end up upside down on it. Then add your time with the entire project. Ask yourself if it would still be worth pursuing?

In any case you must be sure of your figures in evaluating this deal. Newbies very often look at ARV and purchase price without accounting for all associated real costs. At first you might think oh purchase price is $55,000.00 and a potential ARV of $90K we always choose to be optimistic and we neglect accounting for all the real costs. So at very first it really looks like a great deal. We can think oh we will sell it for $90K and really make out for a few months of time and work. Again because we have a tendency to be very optimistic.

All I am saying is make sure and never give up and looking for and finding a deal you can be sure has more upside to it.

Hey @Garrett Diegel , I love that you're taking action!

You've received some great feedback already, I'll just throw in my $.02.

It's always better to estimate the ARV low and sell for more, and not the other way around.

Basic formula: ARV x .7 - repairs = your MAO (Maximum allowed offer)

Just really quick math on conservative figures:  80k x .7 = 56k.  So if you have any repairs at all, which you most certainly will, this is not a good deal.

Get an idea of what your rehab costs will be and you'll be in a much better position to offer the right amount on this property.

Keep looking at properties, driving for dollars, connecting with other investors and you'll find a great deal before you know it!

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