Putting an offer in on my first deal
I'm analyzing a deal right now. It's an MLS property. 3 beds 1.5 baths 1281 sf and no garage but a car port with an asking price of 110k. It's a full rehab(new roof, new drive way, siding is good but a has a few cracks, needs drywall work in one of the rooms(hole in the wall and a crack in the ceiling), full interior needs updated, and some landscaping in the front and back yards. It has two living rooms and one of them can be converted into a laundry room and another bedroom. Right now the washer and dryer are in the kitchen. It's off of a main road as well. I'm going to offer 90k using a conventional loan 20% down and cover the rehab myself(estimated 40k).
My best comp is the house that sold 2 doors down that was just flipped this year that sold for 175k but was only 888 sf so sold for $197 per sf. If I go by price per sf that would put my house at 252k but just to be safe I'm estimating ARV at 200k and the numbers still work. Here are my numbers
ARV - 200k
Holding costs - $5400( $900 a month for 6 months)
Renovations - $40k
Purchase price - $90k
Closing costs on the purchase - $5k
Closing costs on the sale - $17k
I’m just looking for confirmation that I’m doing everything right and that this is a good deal. It’s my first deal so it’s pretty daunting so just looking for some advice.
Thank you,
Drew
Unless someone here is in your market and knows the comps well, they won't be able to tell you if you have the correct ARV or construction costs.
@Andrew Cowles Like Ian mentioned above it is going to be hard for somebody to tell whether this a great deal without them knowing a little bit more information.
Also, depending on where you are located those repair numbers sound like they could be a little low for what you are saying is needed on the repair side of things. Are you planning on doing all of the work yourself or have you consulted a local contractor?
Something else to consider is whether your conventional lender will agree to do a deal like this? You don't want to get it under contract and be in a jam because they won't close on house in need of significant repairs and/or troubles with appraisals.
I agree with everyone's comments and with the market frenzy, cash offers flying everywhere, and shortage of supply it's a challenge. Hopefully conventional buyers are scared away by the pics and listing description. I wish you the best of luck. At minimum it's good value add deal.
Believe it or not Dave, the property is actually in Kent County, DE.
I plan on doing the work that I can such as painting and landscaping and sub contracting everything else.
And my lender is aware that it is a fix and flip property.
@Andrew Cowles If the property is where I think it is, you should be fine with that ARV, as it is pretty conservative.
The rehab estimate sounds a little light for what is required, and is definitely at the top of the hard money range/70% rule range. I know you said you were planning to do some work yourself to save a little money, well now is the time to figure out everything that needs to get done and dial in the price with all your subs. If your price comes out to $40k with you doing only some painting and landscaping that is great, but did you factor in some construction reserves in case you hit other problems?
I think your last step here is just to get really sure of what your all your costs are going to be. Remember to be realistic with yourself because some people get emotional on their first deals and tell themselves things like: "I can just do that myself to make the rehab cost less" or "I can just cut a corner here to make the rehab cost less", in more cases than not that does NOT work.