Would you buy under these numbers?

Question

Hello everyone,

I was just wondering if you guys think this is a good enough deal for a real estate investor.

I'm having trouble talking the owner down any lower than the 160k I have listed, is this still a good deal? I know there are many other factors of course, but assuming these numbers are correct, do you think its worth have the seller sign?

ARV - $280k

Repairs - $30k

Under contract for - $160k

Property Tax - $7k

Details:

Nice area in Northern NJ

1300sqft

3 bedrooms, unfortunately 1 bath.

Built in the 1940's

Colonial style home.

Neil J. · Answer

Great advice Rodney,

My ARV was an average of about 7 homes which sold within the 6 months to year within about a 5 to 10 block radius. All of the comps I've pulled sold from $304k to a max of $325k. These were homes with which had a similar sqft give and take 100sqft. I came up with an ARV of about $306k then subtracted a little over $20k regarding the missing 2nd bathroom which gave me a rounded ARV of about $280k. The repair cost was my estimate and you're 100% right, I should get that estimate done professionally. I try to stay within the 65% - 70% wholesale guide line but sometimes these discounts are extremely difficult to get especially if the home is livable. Also, I hear there are some investors that are more into the end profit number rather than the percentage rule. I just want to know whats not worth presenting to an investor and you've definitely gave me a better understanding. Thank you.

Rodney Marcantel · Answer

Should always follow the 70% Rule to attract investors.

Asking Price = ARV (average of 3 or more comps) X .70 - Rehab Costs

If you're comparing to homes that have 2 baths, then you need to adjust your rehab costs to include what it would take to add a 2nd bath. If that's not possible, then you need to adjust your ARV down subtracting what a 2nd bath would be worth.

Note: Some people don't understand a true ARV number. Make sure your ARV is the average of 3 or more comps sold in the last 3 - 6 months. If that's not possible, then expand your numbers (6 - 12 months or 2 sold and 2 active comps or expand your area some).

Also, your rehab costs should not be your personal estimate. Should be a firm bid from a contractor or several contractors.  That will really help to attract an investor.

Neil J. · Answer

Hi Brent

No listing agent, just me as a wholesaler. The property is currently off the market, and I'm just trying to figure out if there's money to be made between the end buyer and I. I'm pretty new into wholesaling and I just want to make sure I'm giving my buyers quality deals in hopes to build a strong relationship with them rather than them thinking I'm just trying to make a quick buck and not care what happens after I get payed, as some other wholesalers.

Brent Coombs · Answer

@Neil J., Oh, so you are not the listing Agent? Is there one?

Given the comps you quoted in your second post, I don't blame the owner for not agreeing to accept less than $160k.

Go find those Flippers...

Neil J. · Answer

Thank you for your thoughts. It does seems as if this deal is cutting extremely close, maybe I should only charge about $2k for my assignment to relieve some tension from the end buyer, but still make a profit on my end out of a close deal.

Neil J. · Answer

Thank's a lot for the input Brent.

Bryan C. · Answer

@Neil J., what @Brent Coombs says is very true.  If your #s are solid and you can support them with evidence, then you should have no problem finding an investor to take on that flip.  If your #s are off it may not be worth it because $160 + 30 + 7 = 197k but doesnt factor in closing costs, holding costs, unexpected repair costs & your assignment fee.  Add all that in to analyze if the deal still makes sense.  It seems the #s are close and you may find someone.  I hope things work out for you.

Brent Coombs · Answer

@Neil J., in order to get investors interested in paying your listed $160k, you will need to come up with REAL justifiable numbers and comps, not just "assuming these numbers are correct", including realistic Rent-return figures.

If it won't cash-flow, perhaps your next best bet is to attract local Flippers who specialize in rehabbing for the retail Owner-occupier market? All the best...

Neil J. · Answer

Also, about 7 to 9 homes have been sold within a 10 block radius with similar sqft and style for $300k+. The only difference is that these homes have a 2nd bathroom.