[Calc Review] Help me analyze this deal

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I found this prop on craigslist and called on the ad. Turns out the prop is with a wholesaler who had It under contract for 35k with a 3k assignment fee. I had the prop assigned to me and completed an inspection. In reviewing the report, the property is structurally sound but will be a lot more renovations completed and not a light rehab like the wholesaler initially mentioned. The wholesaler had estimated needing 5k -6k in repairs for new interior paint, carpet, plus fixing the bathroom and kitchen. 

 I had a contractor walk the prop and he give a 21k quote, but I also have two other quotes for 10k and 8.5k in estimated repairs. If I give myself a buffer of 12k in repairs, is this still a good deal? I am an out of state investor and this would be my first property. I am trying to decide whether I should still move forward with this deal and would appreciate any feedback. Thanks in advance. 

Is your plan to sell, or Buy & Hold (BRRRR)? I'm fairly new myself, but have years in the title/escrow industry watching flippers, and if you're planning to sell I'd assume that profit margin isn't worth your risk, particularly with the range of your quoted rehab costs. Do you feel pretty confident about the ARV?

If you're planning to buy and hold it, just make sure you've already got a working plan with a lender that knows what you're doing and says they'll be able to refinance you once your rehab is done and it's rented.  If you're confident in your projected rent and okay leaving $13K in the deal for a $350/month cash flow then it's worth considering.

No way to tell if this deal is good or bad.  Need to know what it will rent for and/or what the fair market value is after all repairs are complete.  Also, need to know if you intend to keep it or flip it.

Btw, sounds like you're new at this game. Wholesalers frequently inflate ARV and play down actual rehab costs. My favorite question for most wholesales is, "If this deal is so good, why are you selling it to me?" The answers can be .... instructive! There are a FEW legit wholesalers, but most have no money, little actual knowledge of the market, and are prepared to run away like scared rabbits the minute you start asking hard questions.

@Scott T Brady

Hi Scott,

Thanks for the reply, my plan is to buy and hold, then eventually refi to get my cash out once rehab is complete & rented. I will look into a few lenders to see what they think, so thanks for the suggestion..

I just wanted to make sure I am not overlooking anything major since this will be my first property and also out of state with renovations needed.. the contractor says 10k but I am giving myself a 12k buffer.

I also did some research online and also spoke to a local realtor in the area so the 55k ARV is a fair estimate of the value once the rehab is complete. Lmk if I should consider anything else, thanks!

@Erik W.

Hi Erik,

Thanks for your reply. Through conversation with the wholesaler, he mentioned he had 16 other properties in the area. I asked why he wasn’t keeping this one for himself and his explanation was that he only keeps multi family units and not single family.

The current rent in the area after checking rentometer and speaking with a local prop manager comes in around $850 -1k. The ARV is also around 55k.

My strategy with this prop is to buy and hold, then refi aft the renovation is complete and rented.. let me know if there is anything else I should be considering. Thanks!

@Amaju E. , okay let's recap to make sure I've got all the numbers correct.

$35K purchase price + $3 assignment fee + $10K-$21K repairs + holding costs ($1000) = $49K - $60K

Fair market sales price of $55K after all repairs are done.

Rent of $850 - $1000 / month, assuming no utilities paid, no lawn care provided, etc.  

If you come in on the low side of "all in" ($49K), you're at 90% LTV, so you won't be able to pull all of your cash out. If the costs are higher, you'll get even less back.

From a cash flow standpoint, here's how I analyze.  You may need to make adjustments.

$935 rent (average)

50% of gross rent covers vacancy, expenses, and capital expense set-asides (-$467)

Debt service (after refi). $44,000 (80% LTV) @ 5% APR over 20 years = (-$347)

Cash flow: $121

Do those Fair Market Value and Cash Flow numbers meet your minimum requirements?

@Erik W.  

I was able to speak with the wholesaler yesterday and had him circle back with the seller and got the price reduced by 4k to help with the understated amount of rehab that was needed. The final numbers are now 32k purchase + 2k assignment fee + an estimated 12-15k in repairs to get the place rent ready. 

I like how you broke everything down and were able to analyze the prop quickly! I am not looking for a home run with this deal especially since it will be my first deal, so i think with the $4k off the originally price the numbers could work for me as long as i able able to control the rehab budget.