New Rehab in Metro Atlanta Area

[Adah N.]

Hi Everyone,

I have been analyzing investment properties in the Atlanta area, so far none seem like a good deal. For example;

https://www.georgiamls.com/424-powers-ferry-rd-se-marietta-ga-30067/8749078

3 beds, 2 bath all brick ranch, 1400 sq ft built in 1953

Interior was dated, had extensive damage and because it was built in the 1950s, I estimated it would need extensive rehab including plumbing and electrical replacement.

Based on available comps I estimated an ARV of 270k, repairs 90k (rough estimate from 3 contractors). This brings

purchase price = .75*270-90 = 113k

Even if rehab can be done for a lot less, say 60k, then

Purchase price 2= .75 *270-60 = 143k

Perhaps I understated the ARV? Possible, however, with the current state of the economy 270k is probably not an understatement. Besides, there are other rehabbed properties for sale nearby going for 270k or less.

I did not bother to make an offer, now it sold for

190k. Based on condition of property and how quickly it sold I am guessing another investor purchased this property with cash? We must not be doing the same math. What am I missing?

Any input would be greatly appreciated. Thanks

[Marc Brenner]

Hey @Adah N.,

Your main issue is that you are using a BRRRR purchase standard for an on-market property in an extremely competitive market for investors. Most of your competition is not trying to pull all of their equity out post-rehab. So your 75% off list price minus rehab costs sets the bar too high (or too low rather) right from the start.

Also, after briefly reviewing the comps, I think it's more likely you OVER estimated the ARV. I'd put it closer to $250k. My best guess is this was purchased cash by someone who can renovate very efficiently and who has slimmer margin requirements.

I advise my clients interested in BRRRRing in Atl to direct a portion of their capital to a direct to seller campaign. It's just too difficult to do with on-market properties in this sellers market.

Is your Realtor advising you through this? They should be...