Help Me WIth This Deal

6 Replies

Hey everybody, thanks in advance.

Here is the short story. Home is under contract for $125,000. During the inspections, it was reveal there is a unsatisfactory septic system. It was poorly taken care of and is totally maxed in capacity, soil can no longer drain property due to deposits. (For others that may have septic issues).

The septic repair in my area is going to be $22,000. So....

Here are the PRE SEPTIC numbers:

$280,000 ARV

$125,000 BUY
 $65,000 REHAB
 $30,000 CLOSING/HOLDING
_________
$220,000 INVESTED @ 78% ITV

If we add the $22,000 for the septic, we still make money however our margins get very tight % wise. The $280,000 ARV is a solid, QUICK SALE price. We expect to list this at $315,000.

Thoughts!?

When in doubt don't do it. I do not care how many deals you have done or have not done. Repairs are never just locked at a certain number. I really believe in "gut instinct" type intuition. That's just me! But, if you are even hesitating then you should question yourself by asking: Do I have great contractors in place to handle the repairs? Do I have the ability to add money to the projected septic expense if they come across something that no one knew about ahead of time? Trust me, I have not been doing this a really long time, but you can always bet your repairs are always going to be way more than you project. Unless, of course, you have been doing flips for the last 10 years and have systems in place to handle contingencies. 

That said, it looks like the numbers are there. You should really just go with what you know! Do you know the ARV is really where you think or are you kind of pushing those numbers up a bit? Things to consider are holding costs, staging(you should stage!), REALTOR COMMISSIONS, closing fees, and property taxes, and utilities while you are holding the property. These are things that often get overlooked and can really cut into your budget! Not to mention overages with construction. Partner up with someone you look up to in your area and have them lay eyes on the "deal" and see what they say. They will either want to join with you on the deal or they will try to look out for you. Go with God my son!

I would probably be at about $125,000 with about $23,000 in contingencies.  I always add 20% to my repair costs.

I agree wit Stephen, when in doubt go with your gut.

Good Luck.

Bill

i agree, when in doubt. don't do it. when i see its too tight, i stay away, because in this business everything will not go perfect. thanks 

@Stephen Barton   - Yes, we are knowledgeable in constructions/contracting. Essentially, there is nothing about a house that will make us not take it, minus oil leaking tank!

Other than that - it is about price only.

My gut is in a knot! Because the septic is not an automatic "No Deal", the house is such a steal for the area. As I said, we plan to list it for $315, our $280 is a quick sale arv for qualification of deal.

Bank does not seem to want to move an inch further, we already got them down to $125 from $180!

@Anthony Crecco   & @Bill Jacobsen   - Thanks for the input. We are going to relax a couple days on communications and see if we can get a few of our big ticket items in at a better number. (Not low, just take some of our Nerf out - we also like to add a minimum of 12%, depending on total)

Any updates? Did you buy the property???

Counter offer due to inspection. If nothing else, ask them to eat 1/2 of the septic cost.

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