Is this a Deal?

Question

Here are the numbers: Home built 1959,1465 sf 3,2,1, office area could be 4th Br. Outdoor vinyl siding 4 yrs. old, Needs carpet except Br's  roof approx. 15yr old. So basically just cosmetic fix. Asking for 45,000. Arv, around 90,000. Repairs estimate 5-$ 7500. I have not been out to see the house as of yet so could be more. Based on this information what would you offer on this house? I will add and subtract once I have inspected the property,  but based on this information is it worth my time. I have not determined as of yet what motivation is and will determine when I meet with the seller. Please advise.

Robert Leonard · Answer

I wouldn't offer anything yet.  You haven't mentioned recent sold comps.  Where did the ARV number come from?  Nobody's opinion matters on the ARV - the facts matter.  That's what an appraiser will use to determine what value to place on the property for a lender to offer financing to a retail buyer to purchase the property.

When you have a clear idea of what the ARV really is, you work backwards from there.  What are the estimated repairs?  How much will your holding costs (carrying costs) be for the time it takes to do the repairs?  Will you list the property on the MLS and have to pay commissions?  Did you leave an allowance for the unexpected?  After those things, how much do you want to leave as a profit margin?  That's how you boil down to your offer.  Which shouldn't be your first offer - you should leave room for negotiation.

Aaron Montague · Answer

Shorts Answer: 
	$50,100 as a good offer.  There is about 3k cushion if you need to go a bit higher.

Much Longer Answer:
	The ARV is a vital number here, and needs comps to be validated.  Now there are several ways to improve ARV, none of them are guarantees.  Adding bathrooms is also a great way to up value, hopefully on the cheap.

Opinion 1

Opinion 2 (seems to be the same survey)

A straight forumla:

90k ARV X 70% = 63k

63k - Repairs(7.5k) = 55.5k

55.5k - Real Estate Fee (6% on 90k sale price) = 50.1k

50.1k is your highest price by my calculations.

This is a good price because even if your repairs double to 15k, you aren't going to lose your shirt.

I don't know where your place is, but I see a TON of places available in KC, MS.

MLS listings with at least 3 beds, 1.5 baths 65k-100k:
	Kansas City Places

Start with the address and fan out from there.  Do you have any/some/lots of competing houses in the area?  What have similar places sold for?  What have places with 1 more/1 less bed/bath sold for?

Building your comp list is vital to understanding how the neighborhoods you're investing in will work in the future.  Plus you will be able to guide your buying patterns to beat trends in given areas.

Best of everything, especially profit, with this one.

Dion DePaoli · Answer

The question posed:
	
	Is a 1959 4 Bedroom SFR with 1,456 square feet where the asking price is $45,000 that needs $7,500 in repairs, which will have a after repair value of $90,000 a good deal?
	
	You realize you would be doubling your money, essentially right?  So, yes, if all of that is true, yes sir, that is a good deal no need to even think about it.
	
	That is the good news.
	
	The bad news, those numbers seem unlikely, but strange things do happen.

What this suggests is the seller is happy to leave 50% of the value of the property on the table.  Are you sure you are not overly speculating on your ARV?  That would be the issue.

You would be all in for $52,500.  If you can achieve $65,000 or better in six months or less on a fix and flip that would be a good deal.  Anything above that would be gravy on top.  Considering your numbers are correct and assuming it's your cash and no debt costs, if ARV is at or above $65k it would be a deal.  As the repair value increases, you may want value increase as well or a shorter time to complete the exit.   
	
	I am assuming you didn't want to rent it, since you didn't include any idea of those numbers.

Scott E. · Answer

If repairs are really only $7,500 then this is a deal at $45,000(Assuming you are flipping).

Another piece that I'd review is average DOM(days on market) for properties selling at $90,000 in the area.

Deborah Burian · Answer

flip or buy and hold?

Is this a Deal?

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