Is this a deal?

24 Replies

Beds: 3, Bath: 1, SqFt: 1318, Built: 1957

I was sent this today by an investor. Is this a deal? How do I break this down to the basics?

We need more info Chris! What's the price? What kind of condition is the house in? What are your plans for the property as far as flipping, renting, etc.? What are the comps? What's the neighborhood like (schools, crime, etc.)?

Originally posted by @Christopher Hunter :
Beds: 3, Bath: 1, SqFt: 1318, Built: 1957

I was sent this today by an investor. Is this a deal? How do I break this down to the basics?

Really?

Originally posted by @Christopher Hunter :
Beds: 3, Bath: 1, SqFt: 1318, Built: 1957

I was sent this today by an investor. Is this a deal? How do I break this down to the basics?

Knowing the asking price would be a good start.

And then maybe the Exit Strategy? (Rehab resale? Buy and Hold Rental? Primary Residence?)

Best thread of the day.

@Michael Jobe

@K. Marie Poe

Purchase price $195,000

Closing costs $2,000

Estimated Renovation & holding $35,000

Est. All-in $232,000

Target selling price $300,000

@Donald Hendricks

@Josh C. for a buy & hold property

Purchase price $195,000

Closing costs $2,000

Estimated Renovation & holding $35,000

Est. All-in $232,000

Target selling price $300,000

@K.

Kristine Marie Poe undefined

for a buy & hold

Purchase price $195,000

Closing costs $2,000

Estimated Renovation & holding $35,000

Est. All-in $232,000

Target selling price $300,000

Originally posted by @Christopher Hunter :
@K.

@K. Marie Poe undefined

for a buy & hold

Purchase price $195,000

Closing costs $2,000

Estimated Renovation & holding $35,000

Est. All-in $232,000

Target selling price $300,000

Which is it? Flip for $300K? Or buy and hold? If B&H, what are the rents? We can't be any clearer until you are......

@K.

Kristine Marie Poe undefined I forwarded over the email I received. I guess I should of asked these 2 questions before I presented this to BP? Do I know enough information about this market? Does this fit into a buy and hold model?

@Christopher Hunter

You need to look up some rental information in your area for similar properties. If the average rent for a 3/1 SHR is $4000 a month, you may have a deal, if the average rents for $1000 then you have no chance to make this work as buy and hold. May still work as a flip, but not B&H

@Andrew S. OK. This property is not in my market. I have not done any research for the Boise, ID area. I was just trying to look at different aspects of what makes a deal. I am in the southern California market trying to learn how to become a buy and hold investor and getting good at knowing comps for multifamily properties.

I'm a bit confused. You stated you're looking for a B&H but you mention holding costs in the form of a lump sum. This leads me to believe that you're looking to do a fix and flip? Did the email consist of anything more? If not, send it to the junk mail folder.

Medium sq darkAlex Bejenaru, Premier Pacific Properties LLC | [email protected] | (949) 791‑7073 | http://www.BetterHouseOffer.com | CA Agent # 01701460

@Christopher Hunter Welcome to BP! The saying "you don't know what you don't know" rings true here. As a new investor you need to learn the foundations, so here's a link that will help Beginners Guide to Investing

there are also some great Podcasts too.

In order to be able to make a judgment on buying a property, you want to know not only the details of the property, you need to know the price, and most important, what the value of similar properties in the area are, comps (competitive market analysis) where you compare the attributes of houses, size of lots, types of construction, amenities, upgrades, age of home, etc. against similar properties that have sold in the neighborhood or area.

Get to KNOW your local market. Go to open houses and observe the list I laid out above. Watch for when the house sells, and note the price it sold for, etc. Don't be afraid to talk to the agent at Open Houses, just explain that you're a new investor trying to get to know the market, etc. and "just snooping", most agents have no problem with that.

Good luck, have fun, and don't be shy about posting your questions!

Medium house plansKaren Margrave, Parlay Investments | [email protected] | http://www.parlayinvestments.com | CA Contractor # 680782

Without going into details, I suggest you stay away from this investor until you know and learn more about what kind of RE investing you want to do. The property is a flip btw. There's no buy and hold option as the property is being resold for profit. His deal structuring that uses your money and gives you a 45% profit share is not a good deal IMO.

Hi @Christopher Hunter . I am an investor agent in Boise. If you are truly looking in our area - please feel free to contact me about the local market. It sounds like you may have just been using Boise as an example, but I wasn't clear.

Thanks for posting!

.

Medium labelJonna Weber, Jonna Weber Real Estate | [email protected] | 208‑608‑4884 | http://www.jonnaweber.com | ID Agent # SP41257 | Podcast Guest on Show #80

Christopher - compared to what?

To be blunt, your problem is not just that you are afraid to make a decision on your own to avoid taking responsibility. It's that you have no clue as to what you want or how to measure one deal vs. another.

You, my friend, need to define what makes a deal...to you. Your profile header says that you are a multi-family investor. Is this accurate? If so, you're already family with CAP rates, GRI, NOI, or at least GRM's. These are measurements by which you compare one prospective deal against another.

If these metrics sound unfamiliar, then find a way to compare similar properties in the same geographic market with close ARV (after repaired value). Paying for a current, full FNMA appraisal, and taking it apart reading each page, understanding the nuanced differences between each comparable property and then driving each comp used with teach you a lot.

And then there's the question of how you intend to monetize the opportunity. Fix and sell? You have that part covered? Know contractor costs? Budgeted for cost of resale?

Otherwise, you have asked the classic question: "what is the sound if one hand clapping?"

@Alex Bejenaru I want to be a buy and hold investor. In my actions sets I was told to get on wholesalers list and start putting together a buyers list. This deal was sent to me and I was looking to see if this was a buy and hold?

@Karen Margrave I will need to re read the guide again. I am getting information on both sides about not to invest in the California market and others say to invest in your own backyard. Some are saying there is no inventory here. Others say go out out state. I am just trying to get my foot in the door and learn here in California and invest out of state.

@K.

Kristine Marie Poe undefined I am still learning what is takes to look at a deal.

@Jonna Weber I was just sent over this deal from an investor. I am a new investor still in the learning process. I have not researched your market yet, so I would not want to waste your time until I was a little more knowledgeable about running comps.

@Rick H. Please I need nothing but brutal honesty. I want to be a buy and hold investing. I am in the learning phase of how to analyze a deal. I thought it would be close to SFH, 3-5 comps, find ARV, estimate repairs and that would be my baseline. No I am not familiar with some of the terminology. you used. I am need to crack open the real estate dictionary and learn some more things. I take action once I learn something. I was told the best where to learn is get out there and make mistakes. So when investors send me there deals I start to analyze them and see what makes them deals. I keep hearing that I need to look for someone in the multifamily area and duplicate what they are doing. I am reading Emerging Real Estate Markets, by Dave Lindahl. I am looking at what J Massey is doing. Now I am on BP trying to gain more knowledge.

@Christopher Hunter First off, California is a HUGE state, and a blanket statement telling you not to invest here is ridiculous. Just because you can find property cheaper in other areas doesn't necessarily mean it's a better long term investment.

There's a much bigger picture you need to understand when you are investing in real estate, like local economies, schools, demand, neighborhoods, high crime areas, etc. Most people know their local areas, and trying to learn about new areas that are hundreds if not thousands of miles away, is difficult.

There's a reason real estate in much of California appreciates, strong demand!

Medium house plansKaren Margrave, Parlay Investments | [email protected] | http://www.parlayinvestments.com | CA Contractor # 680782

@Christopher Hunter

its good you're taking some action ... that's more then most do ;-) its clear you are in learning mode too. i remember when i was starting out and didn't know what i didn't know and didn't know what questions to ask. to that end, here's some homework that may help you learn more about how to analyze properties and help focus your action moving forward.

1) sign up for a BP account that will give you access to the analysis tools provided by BP. i'm not sure which level this is...research it and purchase the right level TODAY to gain access to the tools. the tools will prompt you to fill out the boxes ... by way of this process, you will be exposed to the areas you should be considering when rolling up analysis.

https://www.biggerpockets.com/real-estate-investment-calculator

2) I did a quick google search and found a few BP property analysis video's i think will help. these were put together by @Brandon Turner pls watch them, take notes, capture questions, research your questions on BP and if you can't find the answers, ask BP ;-)

https://www.youtube.com/watch?v=dEL7aQz0z_E

https://www.youtube.com/watch?v=-YTvYm-kb1w

https://www.youtube.com/watch?v=KQmChuIW_sY

https://www.youtube.com/watch?v=KQmChuIW_sY

https://www.youtube.com/watch?v=2dXOAegeIZg

3) i like Frank Gallinelli's book "What Every Real Estate Investor Needs to Know About Cash Flow... And 26 Other Key Financial Measures. read it twice ;-)

4) you'll need to know a bit about estimating repairs. worth checking out j scotts books: The Book on Flipping Houses,The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbook i have some experience in with rehab and learned a few things in the estimating book. I like how the books are laid out.

5) after you do the above, then locate a perspective property, apply the principles you learned, input the numbers into the tools, then come back and share your thought process, all the numbers, why you think its a good deal or not, etc.

slow down to speed up. by that, i mean take a week or so to do this homework so you can better analyze deals and get better feedback from BP.

hope this helps.

Kevin Young, Central Pacific Communities, LLC | http://kevinpaulyoung.com