Thanks for all the input!
BTW, I misstated one of the figures , the Comps are $195-265k and I place ARV at ~$230k. Again, $230k is substantiated by pulling the comps, driving the comps, a recent sale 5 doors down, as well as input from a broker I have a working relationship with (not a BPO though). Not to be arrogant but I'm comfortable with that valuation.
Even if you get $229K, $192K all in is 84%. There's not profit there. You need to be at 75% at the very highest, which means you need to be paying no more than about $148K. Even in CA!
Valid point and sound advice it is too slim, thanks.
As far as there being "no profit" I'm (was) still expecting to clear ~15-20k (gross) providing my assumptions are correct. What am I missing? Here's how I'm estimated my costs, rounded up to the nearest 500.
$1500 Inspections (termite +Home + appraisal)
$2500 Closing Costs (Title ins + Lenders policy + Escrow + Loan srv fee)
Note, closing costs are split on the buy and the sell so $2500 represents both halves.
$2000 Conventional financing ( Owner occupied w/ at least 20% dwn)
$12,000 Repairs *see below
$4000 Holding costs (assumes 6 month vacancy on a 4.5% OO 30yr fixed)
$7000 RE commissions (3%)
$29,000 total buy/sell transaction costs.
Is there something big I missed or are you rather saying that even if my assumptions are correct $15-20k is not worth the risk? Either way thanks for the insightful advice.
Regarding repairs, this of course is the biggest variable. My estimate is based on the following:
New carpet/pad (900')
1 new interior door
1 new exterior door
1 screen door
2 stucco patch areas painted to match
Complete interior paint
Misc minor things like interior door knobs, outlet covers, bathroom fixts etc.
I plan to pay for a home inspection and if any defects are found that would affect resale I intend ask the seller for concessions on these. I expect at least one or two faucet, toilet or appliance issues. If it's over $250 I'm going back to the seller.
All the work except for the carpet and help with the yard clean will be done by myself and a friend of mine. He's a retired builder who's partnered with me on 3 other deals and charges me $20/hr cash more as a favor for opportunities I've sent his way in the past.
Question: I ball park $12k for the above repairs with price concessions from the seller for those discovered while under contract - reasonable estimate? J Scott?
Some additional info:
I anticipate 2-3 weeks to bring the property to sale condition once vacated.
I plan to make closing contingent on vacancy and allotting 60 days to close for this in the contract. If there are problem tenants I'd either extend closing or walk away. They are on a month to month lease. I know CA evictions can be a nightmare. Believe me I know.
I plan to list the property while under contract. The contract I use (via Michael Quarles) includes that provision. (BTW where'd he go?)
One last question:
I am curious why use a flat percentage (75%) vs a flat dollar amount? Most houses in my area start in the low-mid 300's. Given that it sounds like you would walk away from a CA deal if you couldn't book at least $80k but elsewhere - say the Midwest - you'd settle for less than $80k on a deal. seems like a lot of money to leave on the table, just curious as to why?