Everything is down in Phoenix

[Robert T.]

My wife and I rent a 3/2 MCM SFH in N. Central Phx with an agreement to buy it from a LOL (little old lady) for $340,000. She wants it sold yesterday; it's free and clear and the zestimate is $390,000. BUT I think this is low?

A house directly behind us (more square footage, but also in original condition) sold for $390,000 seven years ago ($45,000 over list?) and the zestimate for this same house today is $761,500 ($200,000 more, 7 years later?) + another house on the same street just sold for $470,000 and it's very comparable to ours.

This house has been a rental for a long time. It needs everything: new roof, windows/doors, electrical, kitchen/bathrooms, landscaping, etc. it is a good use of space, BUT the house is only 1,250 square feet. The lot size is 1/4 acre (room to add an ADU?) Adding square footage seems to add the most value + adding an ADU would make it a 4/3 (nearly impossible to find among older Phx homes)

If it's done and done right, the house could easily sell for more than $650,000 in 18 months.

We have flipped a few houses and we made money every time, BUT it's been 11 years since we've done a flip + our former "lender" passed away. 

Finance Options?

#1. HML? We don't have 20-30% to put down right now.

#2. Mortgage?  I'm retired and my wife doesn't work (she did all the classes for WFH Contract Tracing, but hasn't started yet) so I doubt we'd qualify right now.  Do lenders ever consider how much someone has paid/is paying in rent?

#3. PML?  How much would a private money lender expect in a scenario like this?  A PML or a business partner/investor would probably be the best scenario, especially since we have a knack for finding good deals. 

#4. Contractor?  Every year a 10 day event is held called "Modern Phoenix Week"  and the Home Tour is the highlight of the event.  They usually choose a few houses from our neighborhood to be a part of it.  This is the perfect project for a contractor who doesn't mind the publicity and wants to showcase their work (when these houses hit the market, it makes news)  However, where does this leave us? 

$340,000 purchase price + $75,000 rehab/holding costs + $35,000 cost to buy and sell = $450,000 total investment 

$650,000 ARV = $200,000 Net (in 18 months)

Other than the local newspaper (which doesn't have a classifieds section anymore) where do you find private investors? 

ANY advice is really appreciated!

thank you in advance, Robert.

[Dan H.]

In San Diego, PML (other than friends and family) are often found at RE meet ups.   There is even a RE meet up that has its primary purpose making private Money connections (Private Lending Masters on Meetup.com).  Before Covid, the organizer did a good job at arranging a good variety of guest speakers. 

Check meetup.com in your area for RE meet ups.  Maybe your area has a meet up that specializes in private money lending.  Also check out Private Lending Masters.   I believe the meet ups are currently virtual so being in Phoenix will not hinder you attending.  

Good luck