[Calc Review] Help me analyze this deal
*This link comes directly from our calculators, based on information input by the member who posted.
Hey BP Family!
I just analyzed my first deal and of course I have a ton of newbie questions that I'm hoping to get some guidance on.
- 1. I found this property on foreclosure.com and they have an EMV of $168,693. I'm not fully sure what this means even after researching on the FAQ of the site. I believe this is their valuation of the property but I'm wondering why it's so far off from the $230k that comps are going for and what the Zestimate is. Is this the suggested offer for a bankruptcy?
- 2. I used the BP Rehab Estimator to come to the total BUT I think I may have been "compounding conservatism" that is to say that I overestimated how much each line item would cost, then I added in a 20% "unforeseen expenses" line item as a safety net. I feel like $60k seems like A LOT for a 1500 sqft house but with replacement of nearly all major home expenditures, perhaps that is close? All of my estimations are site unseen since it sounds like you can't get access during a bankruptcy purchase--is that true?
- 3. I've only completed 1 full rehab--to my own home--and we took nearly a year to complete it because we were doing the work ourselves on the weekends. I'm not sure if this timeline is feasible for this project. I did some reading on BP and it looks like alot of newbies budget 6-24mo for a rehab. I went with the low end because the house is small, it's in our backyard, we have a Project Manager and this isn't our first Reno. Maybe that was overly ambitious? My goal is to analyze/find a deal between now and June, purchase in June, rehab and hope to have it on the market end of 2022, early 2023 (I've also heard this isn't a ideal time of year?)
- 4. I also went on the conservative end of ARV--Zillow and other comps seem to be selling for around $230k in the current condition, renovated comps are going for $275-300k
- 5. I also wasn't certain about closing costs. I used several online calculators that ranged from $3-17k, BP recommended 1-2% of the purchase price so I went with 2%
- 6. Theoretically, it seems like this would be a $300 cash flow BUT that is with only refinancing the amount put into the property. If I pulled out 70% of the ARV, the 2% rule is shot and I'm negative cash flow. Should I not refinance this high, especially when I don't necessarily need the cash and can use the cash we put in and take back out to recycle to the next deal. We weren't planning on touching the cashflow anyway, just keeping it in a reserve account to continue to qualify for conventional loans
- 7. Would this be a better flip? The ROI is $110-$179k depending on actual final reno cost and the ARV range. I'm currently furlouged due to COVID and so REI is my only income as of now. Our strategy was to flip for income and B&H for retirement
- 8. This exercise was really for practice while I get my RE License. I don't currently have access to the MLS but have been monitoring RedFin and Zillow in my target market for about a year now and have a good idea of comp prices and ARVs. After listening to a BP podcast episode, it seemed beneficial to try out a foreclosure.com subscription and see if there might be any deals there. The best/lowest are all $160k+. I know that "money is made on the purchase" so is this range too high? Do I need to start looking into yellow letters or partnering with a wholesaler to find better deals to make the numbers work?
- 9. Last question in relation to finding deals--does anyone have experience with soliciting in the wake of a natural disaster? We had a category 4 hurricane hit the area in August 2021. Most homes just lost shingles or had roof damage that either did or didn't cause water damage inside. We're now nearly 6 months out from the storm and I feel like "distressed properties" are nearly wearing a target on them. If you still have a blue tarped roof, it's likely they are distressed in some way (didn't have insurance, didn't have enough coverage, not enough cash to complete the replacement, etc.)
- 10. For the sake of posterity, I'd love to end on #10. Is there anything I'm overlooking?
I'm aware that these are pretty green questions so I really appreciate any feedback!