How much would you pay for this house?

Question

4-2 across the street from the lake an hour east of Dallas.  @1800SF built in 1980. Some updating already complete.   Needs about $7K in repairs (mostly new flooring).  Possibly add another $3K for a marginal roof that may have a few more years left.
          
          Comps are tough.  The waterfront homes across the street would go from $150K-$300K.  Off the water, they are everywhere from $25K to $100K.  The farther from the water, the lower.  Tax appraisal is $83K  I think ARV is around $70K?, but could be $60K or $88K.  The neighborhood is really lower end , except the waterfront which are really higher.
          
          This one should rent for $750-825/mo.  Iâ€™d most likely keep it long term or lease/option, but this is different that what Iâ€™ve been buying, so Iâ€™d be open to flipping or contract for deed orâ€¦.
          
          What would you pay?

Jon Holdman · Answer

What concerns me is your big range of comps.  If you're sure $70K is a good number, then this seems like an excellent deal.  At $29K plus $10K you're at $39K or 56% of value.

However, with a private money/refi strategy, I get $26,500 as my max price.  I'm assuming 10% and no points and six months until you can refi.  I'm also assuming $1000 in closing costs on the purchase and $2000 in costs to do the refi.

Here's my math:

Rent: $750
Expenses: $375  (50%)
NOI: $375
Cash flow: $100
Max payment $275
Max perm loan: $41,334
Refi costs: $2000
Max amount to be refinanced: $39,334
Total money costs: 5%
Max private loan: $37,461
Purchase costs: $1,000
Rehab costs: $10,000
Max purchase price: $26,461

I really hate funky floor plans.  People do notice.  Some people (ok, most) really just need to stay out of Home Depot.  How bad is this?

Any way to go have a look inside some of the other listings in the area?

I just took a closer look at your avatar.  What is that picture in the background?

Eddie Ziv · Answer

Jon, for 4/2 1800 Sq/ft you should be able to get more rent with section 8 
See the link:
http://www.huduser.org/datasets/fmr/fmrs/fy2009_code/2009summary.odn?INPUTNAME=METRO19100M19100*Dallas+County&county_select=yes&state_name=Texas&data=2009&statefp=48.0&fmrtype=Final

Josh Green · Answer

great job jon. let us know how the deal progresses.

Jon Klaus · Answer

Yeah, I need to look hard at section 8.  I haven't yet because everything else I've been buying has been on acreage.  
          
          I have a 5 BR mobile home on 2 acres under contract that could work for section 8 other than mowing.

Jon Klaus · Answer

Got it under contract at $28,770.

I looked at a bunch of comps today that confirmed that this one is tough to price, but it's location and lake views will keep a net under me.

Rich Weese · Answer

Where you are buying for long term as you stated, the difference between all the estimates given by the various posters are about the same. Between 31-36K won't hurt  you in the long term. If you're trying to re-sell or flip, then more info would be needed by me to give you a #. age of property, your purpose in owning-cash flow or write off and wealth building, etc. Those are different animals. Good luck tomorrow. Rich.

Jon Klaus · Answer

No points on my private money.  I'm going to work hard tomorrow to get real comps and see where I am, but I need to decide by 10AM.  I'm definately leaning towards it, because I am thinking it's worth closer to $80K and could get $850 in rent, too.

The lot is about 90' x 60' with the 90' being street frontage.  That forced the addition to be slightly strange, but high quaility.  The house is 75' x 25'.  I've seen much worse.  Being a lake house neighborhood with few building restrictions, many "unique" homes are nearby.

That's Robert Downey, Jr's Ironman behind me saying "protect your data" which is something my firm helps companies do.

Thanks for the financial analysis!

Jon Holdman · Answer

If you're confident in the $850 number, and assuming my guesses about the costs are close, you could go up to $33.6K and still make the $100/month.  $29K sounds like a very good deal.

So there you go, an honest to goodness 2%/50% deal.

Account Closed · Answer

1800 sf with 10k in repairs?

I'd go no more than $35k if I could not expect any more than $825 per month.

How much is your money gonna cost ya?

Jon Klaus · Answer

I can get it for $29K.  Paying 10% for private money, but potentially can refi after seasoning.

Jon, what else would you want to know?  It does/will show pretty well, but has kind of a funky layout due to how an addition was built.  Not too bad, though.

How much would you pay for this house?

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