NEW LEAD: 3bd/2ba, 1466 sqft house for only $9900...

Real Estate Deal Analysis & Advice
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NEW LEAD: 3bd/2ba, 1466 sqft house for only $9900...

Nikki Robinson
Investor · Valdosta, GA · Member since 2015 · 187 posts · 112 votes

Everything in me is telling me to hop on this. But there's that little voice chanting, "This is too good to be true," in the back of mind.

Motivated seller wants $9900 for a 3bd/2ba, 1466 sqft house in a rural town in south Georgia. It's definitely the very definition of distressed. Here are photos:

(right across the street from $9900 house)

(neighborhood in opposite direction of previous photo)

... It's a pretty decent neighborhood as you can see. The seller included that it "Needs work - New Kitchen, Kitchen floor, Bathroom and overall rehab." From pictures I estimated about $15000 in repairs to bring it up to ARV. Recently sold similar properties nearby went for $39-41K. That's been the going price range for about a year. According to Rentometer, avg. rent in the area is $833.

If I offer $8000, I'd only be in at about $23-26K (leaving a little wiggle room for extra repair costs).

So with these numbers...

ARV: $40k
Repairs: $15-18k
Price: ~$10k
Avg. Rent: $833

Is this really as good of a deal for a buy & hold as I'm thinking it is? I'm a newbie and still trying to wrap my mind around CoC & Cap rates. Would this attract a lender?

Should I start looking for a lender?
How does repaying a lender work when you hold, repair and rent a property?
Will a lender fund 100% of the purchase and rehab?

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  • Rick Baggenstoss
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    Hi Nikki - It's definitely worth looking into if you're looking for a buy and hold.  You rent revenues would be much higher than ongoing costs.  Here are a few things to look into.

    Review the rehab costs yourself.  Advertised rehab costs are only directionally correct.  Make sure you can handle the complexity and scope at your price point.

    Talk to some neighbors about area rents to double check.  Check craigslist/local paper to see how is the competition doing and pricing.

    Last but not least, you can't get conventional financing on a $9k property.  You'll have to find a way to buy for cash.  You might offer $11k with owner financing if you're comfortable with the deal.

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  • Nikki Robinson
    OP
    Investor · Valdosta, GA · Member since 2015 · 187 posts · 112 votes
    11y

    @Rick Baggenstoss

    Thanks for your response. He's willing to do seller financing, $5000 down with $450 payments for 12 months.

    I knew I wouldn't be able to do a conventional. By lenders, I was referring to HM. Or if I tried to find a JV partner to fund the purchase & rehab then flip the house with a 60/40 or even 65/35 split (them taking the bigger cut), do you think anyone would be interested?

    I'm pretty comfortable with the repair estimate because my dad has been fixing & flipping houses as far back as I can remember and I've seen what he can do with a $10-15k budget. I also used to work at a Lowe's store and remember the approx. costs of materials. From conversations with the contractors that used to frequent the store, I also have an idea of labor costs in the area.

    A special thanks for the tips on checking with neighbors, Craigslist and the local paper for rent prices. I'll do that now.

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  • Nikki Robinson
    OP
    Investor · Valdosta, GA · Member since 2015 · 187 posts · 112 votes
    11y

    Well I spent the afternoon doing more research and learned it's likely not enough profit potential for a JV flip. The best plan for this lead seems to be cash buy & hold, private money funded rehab & refi with a small local bank.

    But I'm too much of a newbie still for all that, lol.

    I'll see if I can get it under contract with a max. offer of $8500.. starting offer $6k. It might be good negotiation practice to lowball an already low price. At the very least, I'll see how a seller reacts to that for experience's sake.

    If successful with that approach, I can wholesale it for $10k to a seasoned cash buyer with enough money to handle rehab on their own, so they'll have a nice cash-flowing rental.

    Feasible?

    Oh yeah... after more research, I found Rentometer's average rent to be a little off. Avg rent for similar houses in the area are ~$600-650. Still not bad, in my opinion.

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