Any Advice on This Duplex Deal

7 Replies

Foreclosed Duplex in a small town.  Class C.  Each side is a 2/1.

List price - $101k

Rehab costs - $35k

ARV - $130k

Taxes $3650 annual

Requires flood insurance.

Rehab time - 60 days

Rent possible - $850 per unit ($1700 total).

It's under Fannie first look for 5 more days.  So it's unclear if there are any other investors looking or not.

What kind of offer would you make?

@Bob Crane, one mantra around BP is: You make your money by buying right. A follow-up mantra is: You should be looking at buying it, all-in, for no more than ~70% of its ARV. Here, that's $91k, less $35k, = Maximum Offer of $56k.

So while the Seller may WANT full as-is market value, why should YOU agree to PAY market value?

Can you see any flaw with that argument? Cheers...

I concur with @Brent Coombs...meets the 1% percent rule but my first thought was price is too high. Class C properties require more attention therefore should come with a greater spread... $35k rehab could mean there may be unforeseen issues behind walls which will inflate your budget...

Rent possible? Have you analyzed the market to determine if $850 is top of the market rent?...I prefer to make my rentals  nicer than the market and for a cheaper price to retain tenants and have fewer vacancies....Hope this helps!

The numbers don’t make sense at all I would definitely reevaluate the asking price again the worst they can say is no. You are in the business of making you money and not the seller make sure it’s the best situation for you

Definitely not going to offer asking price.  Realtor concurs that the bank is dreaming.  This was typical during the bust - they are out of state looking at a screen with no idea on the condition of the property.

As for rent - it is a hot rental town.  $850 is middle of the road for a 2/1 without a garage in this area.

Howdy @Bob Crane

Totally agree with everyone. MAO is no more than $56K. Are you planning to Refinance once it's Rent Ready? If so, don't forget to include Holding and Closing costs into your Max offer.

Plan is refi after it is rent ready. This would be my second BRRRR if accepted.

FYI - This duplex came on and off market 3x (due to people not realizing how much work was involved).  It eventually sold for $90k.  In that market after repairs it will still cashflow well.  But it would have had me carrying too much debt (plus not having any equity) and I don't want that hanging over my head.

Thanks for the advice.

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