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Question

Still working on my first deal.

SFH

Asking price $46k.

ARV $85k.

Rehab costs $15k.

Rent would bring $850-900 if I held it (plan b exit strategy).

Annual taxes $1888.

Waiting on insurance quotes. I have no idea how to estimate.

I'm considering borrowing hard money for my first deal.

Marcus Ware · Answer

Based of your numbers the hardmoney will eat up all of your profit or wiggle room. If they're asking 46k you should be offering less depending on what your margins are.

John Horner · Answer

This would be a tight one if you were paying cash, but add 10% interest and 5 points to the HML and it's probably not going to work.

You say rehab is $15k, budget for $20k.  If you think it will take 2 months, budget for 6.  If you get lucky on your first one and finish on time and under budget consider it a bonus.

Insurance is expensive for a vacant house, and usually they will make you pay for 3 or 6 months upfront even if you don't own it that long.

I plugged this into my calculator and at $15k rehab I got about $9,500 profit.  There is not much room for margin there.

Jeremy Jackson · Answer

Appreciate all the help!

John Quebedeaux · Answer

Asking Price 46000

Rehab: 15,000

ARV: 85,000

Offer = (ARV x 70%)= 59500 - (Closing Cost+ Repairs + Holding cost)

85000 (ARV) X 70% = 59500 - Loan amount

85,000 X 14.99% = 12741 divided by 2 = 6370 (6 month interest  reserves)

85000 x 5% (points) = 4250 + 2500 = 6750 escrow fees

59500( Loan Amount) –6750( Closing Cost) –6370(  Holding Cost) –15000( Rehab Cost) = 31380

Purchase Price: 31380

46000- 31380=$14620 need to close deal

Joe Villeneuve · Answer

I don't know Texas, but I do know how to add, and I wouldn't come anywhere near this deal:

$46k       AP$15K      Rehab (I guessing that since this is your first deal, you may have underestimated)$  5K      Cost of HML (5 pts, 12%; assuming 3 months, but....)$  4k       RE Commission$70k      Total cost + fees, closing, etc...

$85k      ARV

IF, you can sell it at the ARV, you have a  good % return (17%), but when you deal with low cost houses, and their low actual profit numbers ($15k if all goes perfect), you really don't have much margin for error.

Greg H. · Answer

I would not in the FT Hood area as the numbers are too thin especially using hard money.  Even if your numbers are spot on and you sold for $85,000 in your area that is more like $75000 because virtually every buyer will ask for closing costs of 4-5k plus realtor fees and title policy

When you count hard money fees and holding costs(things always tend to take longer to sell in Ft Hood area) there is just no money in the deal

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