New RE agent with investor client

6 Replies

Hello all,

I have an investor who is ready go make the move on the "right property" this summer and  I'm wading through information and comps to make sure that his investment balances with rehab money and still come out ahead in the long term. 

His note to me last week:

Thanks for the listing and the comps, but I do not see the opportunity. The asking price on the house is $96/sq ft and the comps range from $88 - $102/sq ft with only one, at $126/sq ft, that would indicate margin. If we negotiate well and by it at $90/sq ft, then put $10-$15/sq ft in it for rehab then we are right at fair market value with no profit margin. Some of the comps below like Cedar St. and Glenn St. where the buy-in is in the $50/sq ft range are more the buy-in price I would be looking for if you stay in this type of neighborhood. We could buy-in at $50/ft, put in $20 - $25 (assuming the cheaper houses need more done to them), come out at $70 - $75 and market for $90-95/ft. On a 900 sq ft house that’s $18k less realtor fee and interest gets us in-and-out in six months time with about $15k pre-tax profit which is worth the effort. Obviously these figures change if you find something in an area bringing $150/sq ft: mainly just look for opportunities that are $20-30/sq ft under comps so that at first pass there is enough margin to purchase, rehab and market.

Of course due diligence is the primary focus though I'm reaching out to seasoned professionals who know the ropes with any advice.

I appreciate your help.

Thanks.

Greg 

Welcome Greg -

Are these in WillCo?

To be frank, he's about 7 years late to be able to find deals like that - look further out, call on non listed properties, out of state owners, ...it's work - if this is his first deal I feel confident he'll run you around and over analyze, especially if he's going "all in" with his available funds. It was suggested to me in 1996 to "work on the right thing", to this day I remind myself of that - good luck.

There is a Clarksville Focus Group from the REIN (Nashville) group, may be able to network through that subgroup for market specifics/off market deals there - save some time and get to know some folks.

Hey Greg, 

$20-30/sq ft under comps is definitely doable! Clarksville area seems to be great for longer-term plays right now just because you can acquire for so cheap, but for the flips you may want to consider moving closer to the city. 

Looking at a deal I've got on the table in East Nashville, for example, I'm seeing about $60/ sq ft under ARV being modest. The actual margins are largely going to depend on the level of finish that your client intends to complete relative to comps - no need to put luxury finish in an area where the attention to detail may not be as well-appreciated and vice versa.

Is he open to a higher price point that brings better returns? 

Thank you. I'm keeping a close watch on MLS for those deals. Though I'm looking forward to making connections with people who have insight to properties in the area. I've checked in with the REIN Clarksville for their next meeting.

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