Deal or No Deal?

Question

I have found a fourplex with fire damage. I looked at the property yesterday and it has good bones. Only two units were effected during the blaze. I saw the fire damage renovation report and it will cost $335,000 to repair it.

The woman is trying to sell it for $275,000 but made an offer of $230,000.

The loan is paid off and she has about $275,000 of untouched equity in the property.

It needs a new roof, new wires, and drywall. It could sell easily for $610,000+  after it is repaired.

Its my first deal and I just want to know if it would be worth it to persue it.

Ryan Webber · Answer

Remember equity is After Repaired Value (ARV) minus repairs minus the purchase price or loan amount.

If the ARV is $610,000, it needs $335,000 in repairs, and the purchase price is $250,000 then the equity is $610,000-$335,000-$250,000=$25,000

$25,000 equity on a $610,000 property is only 4% equity (25,000/610,000), which is not enough to do anything with, even if it only needed $10,000 in repairs.

Chanel Realegeno · Answer

I was going to wholesale it. I thought it might be a deal because it has a TON of equity(over $275,000).  But I was punching in the numbers, it would be hard to profit.

Ryan Webber · Answer

$335,000 to repair it!!!!!!!

Wow, that is a lot of money to fix that.

Just looking at the numbers I would say you need to be at less than half that price to make it a deal.

That is a lot of money in repairs.  How would you come up with all that?  Having that much built into financing is hardly feasible for a new investor.

In my opinion, move on.