Ready to buy my first deal: advice welcome
Hi all,
I'm getting ready to purchase my first house and would love a sanity check and any advice you all may have.
Background
- I'm currently living in a rented room costing me $400/mo
- I have some extra cash which I'd like to start getting a return on
My game plan to meet those goals is to purchase a house and rent one of the rooms to help pay the mortgage. I could:
- (a) Find a renovated home, move in and rent out as-is (prices are ~$260-300k)
- (b) Find a home that needs some TLC (prices are ~$150k), renovate as needed ($50-70k)
I'd like to renovate/househack because I have a flexible move out date (any time before next May), I have cash on hand to make repairs, and I don't mind hiring out & supervising the skilled labor.
Specifics
I've found on the MLS a house for ~$140k, around 1200 square feet. I saw it today: it's been well cared for but needs to be updated throughout. The mechanicals (circuit breaker, water heater, etc) seem to have been updated within the last decade or so. Has internal ductwork driving their heat but not the AC. The roof is brand new.
The obvious fixes include: new kitchen, refinish or replace floors, reconfigure second floor slightly to fit laundry beside the bathroom, repair plaster as needed, new lighting fixtures, paint, other cosmetics as needed
The biggest work I could possibly imagine include:
- Moving an exterior wall to make the kitchen larger
- Structural repairs to the staircase
- Add a second bathroom right above the existing bathroom
- Acoustical and/or thermal insulation for comfort
I haven't gotten any bids yet but I would imagine that work could be done for $50-70k. If I could buy it for $135k then I'm in for around $200k, and it should be worth around $230k.
At that point I would plan to rent the upstairs (private bed + bath + small office) for $600+ per month, which would almost completely cover the cost of my 15-year mortgage.
My next steps
- Find a realtor. The listing agent has offered to do it for me and save us all a little money, but I believe on my first purchase it's important that I have my own representation. Recommendations are welcome.
- Find a contractor, get quotes. Is it reasonable for me to invite one or several contractors over before committing to buying? Or is that typically done during the inspection period?
Questions
Why has nobody else purchased this? Most flipping advice I've read says you have to discover deals before they hit the MLS if you want to make money. This one's been on the market about a month.
I asked the listing agent this question, and she said most flippers are looking for returns upwards of $50k per flip, and that the margins on this house don't quite allow for that (I'm projecting a $30k margin). Does that sound right? Are there any red flags I'm missing?
Thanks!