Can I get opinions on analyzing a deal in a small town?

1 Reply

Hello BP,

Can I get some help analyzing this deal?

The home is located between San Antonio and Laredo Texas. The home is not far from IH-35 a major highway in Texas. City population 4,000. The property has two homes on one lot. The lot size is 0.1.

Home 1:

Year built: unknown

Stories: 1

Beds: 3

Bath: 2

Sqft: 1,182

Repair estimate: Roof, exterior paint and misc. repairs, interior paint, flooring, landscaping.

Home 2:

Year built: unknown

Stories: 1

Beds: 1

Bath: 1

Sqft: 676

Repair estimate: Roof (including some rafters), flooring, paint, 3 windows.

Comps:

Comp 1: 3 bed, 1 bath, 1,340 sqft, built unk, Sold price $30,000 cash, Home needs repairs offered conventional or cash

Comp 2: 2 bed, 1 bath, 870 sqft, built unk, Sold price $44,000 seller finance, home had tenants.

I have current value at $65,500 based on average sold price/sqft of sold properties.

Additionally: subject property has separate electric meters. However, they share water and sewer.

Deal structure: Owner finance. Price $45,000, down payment $3,000. Interest rate 3%. Term 20 years. P & I = 243.58. PITI = 460.26

Exit Strategy:

E.S. 1: Spend approximately 20K – 25K in repairs and rent both units separately. The 3/2 for $750 and the 1/1 for $500. Tenants pay electricity and I would be responsible for water.

E.S. 2: I find a seller finance or rent to own buyer. I sell the properties as is. Obtain a deposit from buyer of apx. $7,500 and payments around $800 monthly.

Finally, I have minimal data on home sales. Therefore, obtaining ARV would be heavily subjective. So, I used comps from similar properties that recently sold that were not rehabbed. I tried to be as concise as possible to keep fluff low. Therefore, if I missed an item of importance. Please let me know. Thank you!

@Marco Lopez I wish I could help and I know this is late.  I had similar questions regarding homes in small towns.  My biggest concern is understanding demand for rentals or seller-financed homes.  I looked at one similar to this lately and backed away due to unknowns of level of demand.  I hate to take my big city norms to a small town and get burned.  But I know people who have done great on these types of properties. Curious how well you know the town or the level of demand.  

Best of luck.  Let us know if you moved forward on this deal.  I'd love to hear about how it went if you did.