Please Help - Baltimore City wholesale deal analysis

[Bj Allen]

Hello All,

This is my first time asking for help here in these forums, so please correct me if I make a faux pas. I am talking with a seller who has a townhome in an appreciating area of Baltimore City which is near the water and known for it's high-end townhome renovations. The comps suggest an ARV of 410,000 to 425,000 if it was renovated as a single family.

The tricky part (for me) is that it is currently being rented as 2 separate units. The upstairs unit should rent for 1350 - 1400 (he is currently getting 1300, but the tenants are moving out Nov 1)  The lower unit should rent for 1100.  (again, the tenant is moving out in 90-120 days.)  The lower unit is ADA equipped for a wheelchair user, and will require about 5-7K in repairs to convert it back to a non-disabled use apartment.  He has rented the house successfully for several years through a local management company.  Both units are in great shape with nicely updated kitchens and baths.

So - it seems there are 2 types of buyers that I could wholesale this house to: 1. A fix and flipper who would want to convert the house back to a single family home and sell it for top dollar.  OR 2. A buy-and-hold investor looking for the 2400 to 2500 dollars in monthly cash flow.

My question is... What would those two buyers be willing to pay?  I am not familiar with the costs of converting a two-unit to a single family home because I have never done one.  I am also not familiar with what a landlord is willing to pay for a 2400-2500 monthly cash flow building.  I need to feel more comfortable with the numbers before I try to put this house under contract, so I really appreciate any and all input from the experts here.

Thanks!

Brenda

[Ezinwanne Hawkins]

My suggestion would be to always look at "highest and best use". You mentioned an ARV of $410K for renovated single families. Do you have comps for 2-family properties in the area? If the comps for the latter are few and far between, that may give you your answer right there - approach it from the perspective of a single family flipper. Hopefully, you've begun to develop relationships with contractors who can give you an estimate on what the conversion will cost; if not, then start. When I first got started in wholesaling, I found that contractors were eager to give me a rehab/repair estimate b/c of the promise of future business or referrals.

Hope this helps, and good luck.