I'm trying to decide weather or not this house will be a good investment for me. It can be purchased for $22,100 And it will rent for $600 per month. I estimate it needs $5,000 worth of fix up to make it rentable. Taxes are $1,600. per year.
So if my fix up estimate is right I'll have $27,100 in it, getting $600 per month rent. Good deal? It is an HUD property if that makes any difference.
Always ask yourself what the house worth to you!. Don't try to "outsmart" the market. You will be beat every time. The evaluation of a property for a flipper or wholesaler is different from a buy and holder buyer. For the flipper/wholesaler it is a simple calculation of profit margin. They cannot buy a property that would be too high to purchase if they cannot make a profit. For the buy and hold buyer, it is a different story. It is about cash flow and long term investment. For me, as a B&H buyer, I rather pay a little more for a good solid property that will guaranty good cash flow, than risking getting that property for the attempt to save a couple of grands.
If they can get past the blue cabinets (ha ha - in fun) they should be fine with the kitchen w/d. At $600 a month how can they complain? - where is this by the way - I think I need to buy in places other than. Southern CA
It's in southern Ohio. Here's some more info, The house is a new HUD listing - less than 7 days old. It is listed at $21,000. I'm trying to decide which way to play this... On the one hand this seems like a very good deal, so I'm thinking there are probably lots of other bids on the property. That's why I'm thinking of bidding $22,100, I'm hoping that bidding $1,100 over the asking price will beat out any other bidders.
On the other hand, If there aren't any other bidders this deal would be a lot sweeter if I could offer $18,500 and get away with it.
So I'm torn... should I offer $18,500 and hope no one else has bid on it, or should I offer $22,100 and be fairly sure the house is mine. Help me decide!
Anything under $30K (including rehab) would be fine if indeed it can fetch you $600 a month. I assume it is a low income neighborhood. (Doesn't have to be a war zone...)
Here are couple of suggestions should decide to buy it. Have the rehab done fast (in and out). Some people may break in just to still the materials.
If you plan to install AC unit outside, do it after you find a tenant (Inform any potential tenant that you plan to install an AC unit so they don't think you are renting a steam room)
Those AC units get stolen very easy (Central and windows ones). If you put a central AC unit, make sure you cage it.
If they can get past the blue cabinets (ha ha - in fun) they should be fine with the kitchen w/d. At $600 a month how can they complain? - where is this by the way - I think I need to buy in places other than. Southern CA
JCC, I own four like those in Birmingham, AL. I can help you fine ones...
I saw your post with the rental from Ohio...you mentioned Alabama some similar properties. I would be interested if the rental pricing is similar. I think his details were 21k and 600per m rental. I have been investing in AZ but 21k will not return 600...so I have been rehabbing larger size homes with some success.
Anything under $30K (including rehab) would be fine if indeed it can fetch you $600 a month. I assume it is a low income neighborhood. (Doesn't have to be a war zone...)
Here are couple of suggestions should decide to buy it. Have the rehab done fast (in and out). Some people may break in just to still the materials.
If you plan to install AC unit outside, do it after you find a tenant (Inform any potential tenant that you plan to install an AC unit so they don't think you are renting a steam room)
Those AC units get stolen very easy (Central and windows ones). If you put a central AC unit, make sure you cage it.
Good luck.
Thanks for the input Eddie, It's not in a bad neighborhood like you might be thinking. It's on a quiet no outlet street in what I'd call a working class neighborhood. It already has a central AC unit outside, I've never heard of people stealing those things...
I still don't know what to do, should I offer $18,500 or $22,100? I need input on what to offer!! :D
You need to know what its worth. So, you need to have recent, similar comparable sales.
As a rental, its a great deal, assuming the things others mention are ok (not a war zone, can get tenants, etc.) I'd paint those cabinets. I wouldn't worry about the W/D hookups in the kitchen, unless that's unusual. Pretty common for post war ranches around here.
If comps show this is worth a higher price, you need to bid higher to get it. If comps show other similar properties are selling for $15K, you can bid lower.
The HUD company here publishes the bid results. It takes a couple of weeks before they show up, but you can see what the accepted bids. If its the same there, you can spend some time looking at other bids and get an idea of what it might bring.
If you bid on a HUD and your bid is accepted, your earnest money is committed. At least here, and I think its that way everywhere. Do your inspections before making the bid. Doesn't matter what you find after your bid is accepted, you're not getting the earnest money back.
I said this before in previous discussions because we have used this strategy. If you really want the property and think you have multiple bids, rather than loose out offer a price equal to the highest bid plus $1,000.
If you bid on a HUD and your bid is accepted, your earnest money is committed. At least here, and I think its that way everywhere. Do your inspections before making the bid. Doesn't matter what you find after your bid is accepted, you're not getting the earnest money back.
I didn't know that, I was under the impression that after I put down my earnest money I had a chance to have the property inspected, and if there was for example a bad HVAC system, I could get my earnest money back.
Also, does anyone have an opinion on the converted garage? Do you think it adds or detracts anything from the property?
I bid on a lot of HUDs. I rarely bid over asking. I've gotten most of mine for under 75% of asking. And most of those after they've dropped the prices. I win less than 1 in 10 bids, but that helps ensure I buy right.
Do not be afraid to bid low and be fine with losing auctions. Many more foreclosures are coming.
In this price range/neighborhood a garage conversion probably doesn't hurt. When you sell, it could be converted back if need be.
for the bid amount it really depends on the shape of the house and how active your market is.
around here (central ohio) its really active and lately everyone is buying everything. To get a good deal I will over-bid by atleast 1,000. Last house I over-bid by 2,000 b/c I know it will bring me back SOOO much money 2k isn't nothing.
Think about the money you'll make and the profit to get your numbers. Then you'll know what your max bid can be.
Always ask yourself what the house worth to you!. Don't try to "outsmart" the market. You will be beat every time. The evaluation of a property for a flipper or wholesaler is different from a buy and holder buyer. For the flipper/wholesaler it is a simple calculation of profit margin. They cannot buy a property that would be too high to purchase if they cannot make a profit. For the buy and hold buyer, it is a different story. It is about cash flow and long term investment. For me, as a B&H buyer, I rather pay a little more for a good solid property that will guaranty good cash flow, than risking getting that property for the attempt to save a couple of grands.
It should work Brett. Don't go crazy on rehab. From what you shown you're rent ready condition now with a little cleaning. I would consider even leaving the blue cabinets but if you decide to repaint them give them a couple coats of Kilz and they'll be fine.
Check the market though. I used to think 25k properties by me were a deal until I figured out what I could get for 8-10k. Sure I could rent the 25k ones for 600-700 a month but found I could rent the 8-10k ones for 575 a month. 700 a month vs. 1150 a month (575 X2)......
Thanks for all the advice guys. I have decided to bid $22,125. I figure if I keep waiting for the perfect deal I might waste too much time. This will be my first property and I figure at the very least it will get me off the fence and into the real estate game.
After i put my bid in do you guys think I should pay for a property inspection, or just do a basic inspection myself? For example if i did it myself I would probably just make sure the HVAC worked alright, make sure the water worked alright, and maybe crawl into the attic and see what's going on up there. It would be nice to save the $275 on a home inspection. What do you think?
.. This will be my first property and I figure at the very least it will get me off the fence. and into the real estate game.
... It would be nice to save the $275 on a home inspection. What do you think?
Save the $275 by lowering your bid by that much, and spend it on the inspection. Given this is your first time, repair issues could be your first big mistake. you already did YOUR look at it, now get some other experienced opinion too.
Thanks for all the advice guys. I have decided to bid $22,125. I figure if I keep waiting for the perfect deal I might waste too much time. This will be my first property and I figure at the very least it will get me off the fence and into the real estate game.
After i put my bid in do you guys think I should pay for a property inspection, or just do a basic inspection myself? For example if i did it myself I would probably just make sure the HVAC worked alright, make sure the water worked alright, and maybe crawl into the attic and see what's going on up there. It would be nice to save the $275 on a home inspection. What do you think?
Inspecting a HUD. HUD does their own inspection and issues a report. Do you have the report? If not, ask your agent. The report is not exhaustive, not even accurate always, but it gives you an idea.
I typically don't look at the home before I bid, but I do read their report. I assume I will have to paint and recover floors, since they really don't report on these. When I win a bid, I immediately go to the property and do my own inspection, making a list, and setting a rough budget. Only then do I sign the contract and send in earnest money.
If the house is worse than I expected. I will consider bailing at that point. However, I bid low enough, with a margin for error, so I generally move forward anyway. This isn't a perfect method, I have gone over budget. On the other hand, I have gone under budget, too. This combined with bidding in the 30-45% of ARV value, make the numbers work for me.
I have not paid for a professional inspection on a HUD. If you are not comfortable with my method, you could do your inspection with a contractor who gives you a price. Could be free or just a modest amount.
If you bid on a HUD and your bid is accepted, your earnest money is committed. At least here, and I think its that way everywhere. Do your inspections before making the bid. Doesn't matter what you find after your bid is accepted, you're not getting the earnest money back.
I didn't know that, I was under the impression that after I put down my earnest money I had a chance to have the property inspected, and if there was for example a bad HVAC system, I could get my earnest money back.
Also, does anyone have an opinion on the converted garage? Do you think it adds or detracts anything from the property?
Here in Texas you submit your offer on the standard offer form which gives you the inspection window where you can get you option money back. After that HUD then has a bunch of their own forms that they make you use.
Congratulations on just doing it. So many people that I know are always talking about puting in offers but never do. You have to stats somewhere.
As for the garage conversion I have done a few. You di get to advertise it as another bedroom. If you decide to put a bath out there make sure you talk to a plumer before as it can get tricky with the drains.
Thanks for the input Eddie, It's not in a bad neighborhood like you might be thinking. It's on a quiet no outlet street in what I'd call a working class neighborhood. It already has a central AC unit outside, I've never heard of people stealing those things...
In the heydays of the booming construction period, people (Mainly in the south east) used to bust a $6,000 AC unit to still $35 worth of copper. Since the price of copper went down, it sort of slowed down but prices started creeping up again and I suspect that "habit" is making a strong come back especially during this bad economy. It became so bad that I saw on several occasions pickup trucks full of used AC units driving in broad daylight on the streets of Birmingham, AL undisturbed.
If this is your first time, I'd recommend paying for an inspection. Do read the HUD report. In our area, these are quite thorough. They're as accurate as any inspection, which is to say its almost certain the inspector has missed something major and noted a bunch of minor, obvious items.
Be sure you find out the process, when you have to give earnest money, and when, if ever, you can get it back. Here you must submit earnest money with your bid, and if they accept your bid you will never see that money again. It may be applied to the purchase, but if you don't buy for any reason whatsoever, they keep it.
I'm with Eddie on the AC cages. I've considered putting AC in some of my houses. Its more and more getting to be expected, and would make renting easier. But on at least one of my units, I guarantee a cage would be a good investment. You might say, well don't put AC in that one. But its the one where it would make the most difference.