Might Have A Deal & Need Help

[Darryl Brown]

Hello Everyone,

I've been a member for a few months and acquired quite a bit of knowledge from this site. I've also got stuck with "analysis paralysis" for a while but, just recently started moving and things started happening.

Fast forward, through one of my Craig's List ad's, a lady calls me with a house that she wants to sell for $175k. It needs $20k in repairs. The last five sales averages to be about $270k.

Here's the part that's interesting, the house next door sold for $320k.

This is my first deal and from what I can see, this qualifies.

Am I right?

Any buyers for this?

Any advice would help.

[J Scott]

Some questions:

- How do you know the house needs $20K in repairs (as opposed to $30K or $100K)? Have you seen the house yourself? Have you gotten contractor bids (or are you very familiar with rehabbing yourself)? Often, new investors will underestimate rehab costs or will trust the seller when the seller tells them how much the property needs in rehab...don't fall into this trap.

- You mentioned that the "last fives sales" averaged $270K. In some neighborhoods, this means a lot -- for example, neighborhoods where every house is pretty much identical, was built at the same time, and is pretty much in the same condition. This is rare. In most neighborhoods, houses vary in size, year built, style, construction materials, number of room, amenities, upgrades, and condition. So, were the last 5 sales houses that were very similar to yours?

- Likewise for the house next door. Was it very similar to yours in terms of year built, construction materials, size, number of rooms and condition?

- You mentioned the 5 houses averaged $270K in sales price. What is the range? Were they all near $270K or were there any significantly below/above $270K? This may affect your ARV.

- Is your rehab estimate of $20K based on getting the house to the same condition (or better) of the 5 comps?

All that said, if you're confident of your numbers -- you can really purchase for $175K, you can really rehab for $20K, you can really sell for $270K, and your fixed costs aren't much more than $25K -- it sounds like you probably have a very decent deal.

If you were to rehab and resell it yourself, you could likely make $45-55K. If you chose to wholesale it, you could likely make $10-20K.

Just make sure you check your assumptions before you commit to anything!