I have a potential deal in the San Francisco Bay Area and want to run it by more experience investors before I pull the trigger on it.
The home is located in a very nice area, the home is 40 years old and is located in a very desirable school district with the high school less than 1/2 mile from the home.
Sellers owes approximately 240000 on it and wants to walk away with 150000 in their pockets.
The home does need extensive repair to sell for top dollar. Both Bathrooms need remodeling and the master needs to be taken down to the studs and have the subflooring replaced. Kitchen remodel and flooring throughout the home. Landscaping front and back and new garage door. I estimate the repairs with be around 75K.
So if I pay 390K with 75K in repairs I would have 465K in the home and the potential profit would be 100-115K.
Would you enter into this deal?
Fisbo? Are you including brokers fees in this when you sell? Also how long will the repairs take?
Repairs will take 3-5 weeks. No, the brokers fee's were not in the figure.
You stated the seller wants to net $150k thus, you pay all closing costs. That puts you above $400k in acquisition costs, plus $75k in rehab, you are way over 80% all in so that would be a very tight deal.
Is this your first! If it is, I say don't do it, way too tight for a new rehabber and you Will make mistakes.
Hmm. Based on the 70% rule and deducting rehab and carrying costs the purchase price should be around 318,500. But being that you're a fellow bay native, we both know unless you're buying a shopping cart that ain't happening. If you're confident with your Arv, contractor, and your Realtors ability to sell, go for it.
Yeah Jordan, as you know there is nothing you will buy in Fremont for 318K, not even close. The seller is very firm on the price as it's a home that they just inherited from there parents. This is possibly be a home that I would consider moving into.
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High School is the closest to the home, but there is also a highly rated Middle and Elementary School within one mile where children of the area attend.
Owner financing or purchasing subject to could make this very tight deal a bit more attractive, I would be looking into these options. On a straight purchase with cash/borrowed funds, it is pretty darn tight for a first timer.
Thank Will. Spoke with the owner again yesterday and they will consider holding a note for 150K due and payable in 12 months or upon sale of home at 3% interest. Since the 1st would be paid off they would become the 1st mortgage holder. As far as price, they will not budge off there price and I know if it hits the MLS it will sell within days taking into account the area and price they are currently selling at.
3% interest is attractive! that beats the 10-12% you would have to pay a private lender and no points saves from the hard money lender. Taking this into consideration, the holding costs become less so calculate the savings and add that to the return. If the end result is a return that is sufficient and enough spread to protect from losing money, then this benefit could make the deal a go.
Post the results and we can weigh in.
@James Rogers, based on what you have put up on this forum, IMO, you don't have all the information required to make an informed decision about this deal. You need to do a better analysis of all your costs and potential delays, etc. Your first deal won't go smoothly, you need to allow for that.
Marry in haste, repent at leisure! Take your time and do your numbers properly and thoroughly. Then revise. Good luck with it.
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