[Calc Review] Help me analyze this deal

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[Calc Review] Help me analyze this deal

Alexander M Petersen
Real Estate Agent · Tucson, AZ · Member since 2019 · 2 posts · 0 votes

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*This link comes directly from our calculators, based on information input by the member who posted.

Hello everyone! I'm thrilled to say that this is my first time posting here on BiggerPockets! First off, I am really excited to start meeting the members and getting any input that I can. Eventually, I would love to be able to do the same for others out there! With that said, I guess I'll just dive right in! 

All numbers are actual figures from the seller. Currently, the property is fully occupied and being managed by a local team. Asking price was originally $225,000, but for the area and other comparable properties, my agent and I decided $180,000 was more reasonable. Received a counter offer asking for $215,000. Running the numbers, I told my agent I was more comfortable with $205,000, but would agree to $215k if it meant getting the property. To make a long story short, my agent was able to negotiate the price to $205,000, but the seller says they will not make any repairs to the property. I'm looking for any kind of general feedback or thoughts about all of this. One question I have, should I be concerned that the seller does not want to make any repairs to the property? It's being marketed as recently renovated so to me this feels a little off putting for some reason. Also, when/if I agree to their conditions and move into inspections, if something does come up that needs repairs, can I then at that point ask for a price reduction or credit to mitigate some of the costs? What exactly are my options? 

I'd like to thank everyone in advance for taking the time to help me out and I am looking forward to hearing from you! 

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  • Travis Holmberg
    Queen Creek, AZ · Member since 2019 · 7 posts · 4 votes
    7y

    Hey welcome!! always nice to see another investor from AZ, especially UofA territory!!

    "should I be concerned that the seller does not want to make any repairs to the property? "   Absolutely!!! You need to get an inspector to see what kinds of repairs you are talking about.  Would you buy a $50,000 used car with no contingencies with the seller saying they will not agree to any repairs and you having no idea what it needs done?  I would not agree to a deal without a contingency pending inspection results.  Your $205k property might come back crystal clear or might come back with $50k in necessary repairs.

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  • Alexander M Petersen
    OP
    Real Estate Agent · Tucson, AZ · Member since 2019 · 2 posts · 0 votes
    7y

    @Travis Holmberg

    Thank you, thank you! Trying to get my feet wet with real estate and wildcat country seems as good a place as any to start. 

    I appreciate the insight and absolutely see what you're saying. I spoke with my agent and we're going  to do just that, move forward to inspections with contingencies in place to be on the safe side.

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  • Pamela Sandberg
    Realtor / Attorney · Phoenix, AZ · Member since 2018 · 388 posts · 265 votes
    7y

    It really comes down to expectations. If $205k is the wholesale price, it's not reasonable to expect much on repairs. If it's the retail price, then yes, repairs generally come with that. 

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  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    7y

    Have it inspected. I saw the photos of this Palmdale. Chk A/C, furnace, smoke detector, railing and roof. H2O leakage. Order termite rpt if it is a local custom.

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  • James Melillo
    Member since 2019 · 4 posts · 0 votes
    7y

    I'm going to assume that you are sophisticated in understanding the property location, the growth in that particular neighborhood, particularly for employment as well as companies that are moving in or out of your specific neighborhood. 2nd I'm assuming that you know what the socio economic trends are of the property without that knowledge there's no sense in even doing what everybody above has recommended. Given that you do have both of those areas in hand the question then becomes why do you think it's worth 188 or 205 or 218.  Those should not be emotionally driven numbers those should be based upon cash flow, investment upside capability, of increasing average rent per unit and the ability to control operating costs through having tenants pay for electricity or gas or water as an example. The fact that you seem to have multiple numbers for this property would leave me there believe that this is a what it's worth estimate versus a 3 to 5 year cash flow analysis.  So once you know the socio economics once you know the corporate employment direction in that neighborhood and then have a careful analysis's figuring out what the correct number is gets easier and then you can listen to the people above about repairs. I started investing only in Scottsdale and now have moved South of the city because Google and Intel both have moved in there and that's the place to be for upside on rental. Hope this helps

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  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    7y

    Alexander,

    No matter what sales price you settle on in the contract, the inspection period is your chance to find any issues that may affect the price you are willing to pay. I've had several transactions lately, representing both buyers and sellers, where the seller responded to the "Buyer Inspection Notice and Seller Response" (aka bin-ser) with an offer of a credit at close of escrow in lieu of repairs. These credits ranged from $1,200 to $4,500 on homes priced between $300,000 and $550,000. So that's your chance to essentially reduce the price to reflect items that need attention.

    Hope this helps,

    Melanie

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  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    7y

    Alexander,

    No matter what sales price you settle on in the contract, the inspection period is your chance to find any issues that may affect the price you are willing to pay. I've had several transactions lately, representing both buyers and sellers, where the seller responded to the "Buyer Inspection Notice and Seller Response" (aka bin-ser) with an offer of a credit at close of escrow in lieu of repairs. These credits ranged from $1,200 to $4,500 on homes priced between $300,000 and $550,000. So that's your chance to essentially reduce the price to reflect items that need attention.

    Hope this helps,

    Melanie

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