Investor · San Jose, CA · Member since 2017 · 20 posts · 5 votes
Hey, bigger pockets
I may have stumbled upon my first RE deal in the SF bay area!! let me know what you think.
Plan:
Buy and hold, I am looking to move in and possibly house hack a bedroom. ~700/month
About the property:
4 bed 2.5 bath 1700sq townhouse off market. The owner/agent is offering it at $680,000 ferm.
Needs:
Full rehab but its livable.
Rent:
ROM has it as $3500/m
Comps:
2 bed 1.5bath updated listed at 575,000 (redfin estimates 610,000)
3bed 2.5 bath updated sold 685,000 in April 2017
Also, the seller is a realtor too, I have not agreed to let him represent me as the seller but I'm open to working with him to possibly make the deal work.
Investor · San Jose, CA · Member since 2017 · 20 posts · 5 votes
9y
Hi @Brent Coombs , I assume that since I do not have a realtor yet he would want to represent "both buyer and seller". I would only be OK with that if I found this was a good deal.
You do make a good point, this deal does not get close to the 50% rule, but in my area homes are selling for very high asking prices causing bidding wars.
I was considering this deal because currently, I am paying $2500 for rent. Whereas PITI would be $3800 and I would be able to use the tax advantage of ~1000/month to help supplement that. I could then find housemates to help pay for the rehab.
Also, there is a 2 bed 1.5 baths fully rehabbed unit listed for $585,000 that has the potential to go for up to 610,000.
There is alose a full rehabbed similar3 bed unit valued at 712,000.
I do agree with you about the asking price being close to market value, but I feel if it hits the open market the price may be driven up.
Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
9y
This is at best a market retail price, probably higher than that.
Do not buy from a realtor seller, he knows a lot more than you do on the market. If he thinks it will sell at 680k on open market, he will do that.
He is likely thinking of saving some commissions from the buyer side. If you let him represent you, you should ask for a discount.
I am having a hard time estimating rehab cost because im not a contractor, but I am willing to rehab as I go. I know that before moving in I would at least do paint, scrape the ceiling and a deep clean.
I do think $680 is expensive.
What do you think would be a good deal on this property?
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
9y
I have zero clue because you say it needs a full rehab... rehab would drive the price of the unit. Deep Clean, Scrape, and Paint, could run you close to 5k fairly easy. For your comps are these sold properties or for sale? List price doesn't mean they sold for that much. But just from what you said so you get a better idea...
680k purchase, 20% down probably going to run you close to 12k in closing costs. So you're going to need almost 150k cash for this deal. Then let's figure a modest 25k for your rehab budget (which really doesn't go as far as you'd think). If you are trying to save some money with a househack... this won't be it. If you're trying to invest... this probably isn't it either. The fact that you can't even estimate rehab costs increases your risk of getting ripped off or missing obvious costly repair items tremendously... Seems silly to toss in a almost 200k to increase vs what you're paying for rent. I'm willing to bet you a round of drinks you can either find a better deal and I can basically guarantee you can find something that would be cheaper to rent than 200k and 3800 a month.
I am having a hard time estimating rehab cost because im not a contractor, but I am willing to rehab as I go. I know that before moving in I would at least do paint, scrape the ceiling and a deep clean.
I do think $680 is expensive.
What do you think would be a good deal on this property?
Why ask "What do you think would be a good deal on this property" - when you've already been told "$680k FIRM"?
If this Realtor would actually NOW talk to you about a "deal", I reckon you should walk away - on principle!
What principle? The principle that he'd ALREADY be proven to be a liar (if he did now consider a lower price)!
But can't a Seller change their mind? Sure. But with him, it would PROVE that it's just a game to him.
Playing with YOUR tens of thousands of EXTRA dollars, when you shouldn't have been asked to believe he's "firm"!
Thanks for sharing the Realtor shenanigans that seem to still be rife in that part of the world.
How about: subletting your CURRENT rental to help out with your expenses? (Or, consider doing THAT, elsewhere?)
If you've got $200k, you probably should look for a GENUINE off-market deal, from motivated/distressed Sellers!...
Investor · San Jose, CA · Member since 2017 · 20 posts · 5 votes
9y
Thanks, BP community
IT seems that this "not so deal" is looking like it may fall apart. I contacted my realtor to take a look at the property and to negotiate on my behalf. I'm thinking he may be able to find a price that works for both of us.
Worst case is that the property hits that market and I can watch it form there.
I'm really not in love with this property because I'm not really into rehabs, I was hopeing to capitalise on the crazy apreacation that my area is having.
Moving forward I will keep looking for a more "move in ready" property that I can househack. My only issue is that properties that meet that criteria are mostly out of my price range or in a bad area.
Investor · San Jose, CA · Member since 2017 · 20 posts · 5 votes
9y
Update....so the townhouse hit the market this morning. After meeting with the seller my realtor thinks the I should offer $650. I am strongly considering it. If I can get it for that it will bring down to PITI to $3550
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
9y
Not my deal. Several things do not gyrate.
What is the appraised value from a third party (independent appraiser) say? A full blown former appraiser that you need to get a mortgage.
Your comps values are not right. I want a 3 or 4 brm, 1500-1900 sf town home with similar hoa due +/- 10 years within 1/2 mile or so sold last 90 days, same school or equivalent quality. I will never use a realtor's CMA as he will find you inflated values. As a realtor he only needs to pay buyer agent not on his side. If he puts on the MLS he will get all kinds of offers high or not why he is selling as "pocket listing just to you 680 ferm"?
Your rent of $3500 is high. For single family homes in central, Cambrian Park, Campbell I see one may have to pay that much. This one in North SJ even very new in move in condition with attached garage will not fetch that price. Rent is way slower each year with peak 2.5 years ago. So unless I hear the appraised value -rehab cost(inside is never much if you know what your are doing-2.5%) is what the highest you want to pay. You can hire a realtor to represent you to make it easier and fair (you pay him direct).