Is my first deal a bad one?

20 Replies

I got my first property under contract a few days ago and it seems to be a pretty good deal.  I have been marketing for a buyer for the last 2 days and have not had one lead.  I am hoping that anyone here will be able to look at the stats of my deal and tell me if it is a good or bad deal.

ARV: 107K

Estimated Repairs: 25k

Asking Price: 38k

The property is a duplex if that matters.  I appreciate all help that i get on this.  I am working really hard to close my first deal.

I should also mention that I am doing all of my marketing with no money at all, and i figure if I can find a motivated seller with no marketing budget then i should be able to find an end buyer without one as well.

A couple of quick questions, before I address the numbers...

1.  Do you have the entire duplex under contract or 1/2?

2.  What's the neighborhood like?  Is it declining, appreciating, steady?

3.  What are the rents in the neighborhood doing?

Hattie

Change the way you are marketing to potential buyers. 

If its a good deal you'll find buyers no doubt.

Originally posted by @Hattie Dizmond:

A couple of quick questions, before I address the numbers...

1.  Do you have the entire duplex under contract or 1/2?

2.  What's the neighborhood like?  Is it declining, appreciating, steady?

3.  What are the rents in the neighborhood doing?

Hattie

 1. I have the entire duplex under contract.

 2. I would say that the neighborhood was steady.  (I may be wrong like i said this is my first deal)

3.  I don't understand this question. Could you elaborate?

Originally posted by @David Brown:

Change the way you are marketing to potential buyers. 

If its a good deal you'll find buyers no doubt.

 Could you give me some suggestions on ways to change my marketing?  As of right now i have been posting on Craigslist and Backpage as well as emailing the owners of rental properties in that area letting them know that i have a property in the same neighborhood for sale (which may not be a good idea considering the owners that i contacted are trying to sell their property, so i doubt they are trying to buy more).

I'll guess that like many new wholesalers that either your ARV is to high, your repairs are too low or a little/lot of both.

In first pass marketing assuming you give the location the ARV is most likely to be the problem. If it is way to high then people see it and the location and don't look any more.

IF your numbers were accurate it should get taken in a minute.  At that price another wholesaler could buy it from you and turn around and sell it for a $5-10K profit.

Medium rre logo web rgb w motoShaun Reilly MBA, Reilly Real Estate, LLC | [email protected] | 1‑800‑774‑0737 | http://www.MassHomeSale.com | MA Agent # 9517670 | Podcast Guest on Show #43

@Dewarren Sanders  

Based upon current market rents, in the neighborhood, what would your expect each side of the duplex to rent for?

One other question...I assume you're wholesaling this deal.  Is your "wholesale fee" baked into the asking price, or is it on top of the asking price you listed?

@Dewarren Sanders  If your numbers are right they look good. Try calling all the for rent signs and craigslist postings in that area. Ask if they'd be interested. Call other wholesales. Maybe they can supply a buyer and you can give them a split. 

But I suspect that your numbers are off somewhere because a true deal will draw buyers. 

Originally posted by @Shaun Reilly:

I'll guess that like many new wholesalers that either your ARV is to high, your repairs are too low or a little/lot of both.

In first pass marketing assuming you give the location the ARV is most likely to be the problem. If it is way to high then people see it and the location and don't look any more.

IF your numbers were accurate it should get taken in a minute.  At that price another wholesaler could buy it from you and turn around and sell it for a $5-10K profit.

I got the ARV from zillow. They have the estimated value at 117k also other 4/2 duplex in the area are estimated between 105k-125k so i said 107k for my property. Was i wrong in doing this?

Also i had a contractor estimate the repairs so i am sure they are accurate.

@Hattie Dizmond   

I expect each side to rent between $575-$650 a month and my assignment fee is included in the asking price.

Originally posted by @Dewarren Sanders:
Originally posted by @Shaun Reilly:

I'll guess that like many new wholesalers that either your ARV is to high, your repairs are too low or a little/lot of both.

In first pass marketing assuming you give the location the ARV is most likely to be the problem. If it is way to high then people see it and the location and don't look any more.

IF your numbers were accurate it should get taken in a minute.  At that price another wholesaler could buy it from you and turn around and sell it for a $5-10K profit.

I got the ARV from zillow. They have the estimated value at 117k also other 4/2 duplex in the area are estimated between 105k-125k so i said 107k for my property. Was i wrong in doing this?

Also i had a contractor estimate the repairs so i am sure they are accurate.

If you have a contractor quote for the repairs those should at least be in the ballpark of what others will estimate.

However using the Zestimate to guess on ARV is not a good idea. Those are usually useless. You can use Zillow but only to find the recent sold comps in the area. Find those for other duplexes in the area with similar units the last 3-6 months tops. Try to keep them as close as possible to keep the neighborhoods the same. In a city no more than half mile and probably can find enough in a quarter mile.

Those guys you emailed that are selling properties in the area, how much are they trying to sell theirs for?  If they are way below your price that is an indicator you are way off.

Medium rre logo web rgb w motoShaun Reilly MBA, Reilly Real Estate, LLC | [email protected] | 1‑800‑774‑0737 | http://www.MassHomeSale.com | MA Agent # 9517670 | Podcast Guest on Show #43

So, assuming that your ARV is accurate, the area is rentable, and the repair cost estimates are reasonably accurate, you've got a great deal.

Have you taken the deal to your local REIA? Have you posted the deal on Craigslist? Have you posted the deal here on BP in the marketplace?

I'm going to try to "summon" one of my favorite BP members to read and a Memphis expert.  :)  @Curt Davis always has great advice to share on the Forums and will definitely be able to give you much better and more market specific advice than the rest of us!  If he doesn't see this post, you can find him using his BP profile...

https://www.biggerpockets.com/users/Curt

If your numbers are good this should be a deal.  If you haven't moved it yet let me know.

@Dewarren Sanders  

Recheck your ARV with a full comp list. Pull every Duplex in the same zip code that HAS SOLD in the last 3-6 months.

The closer to your duplex gives the sold value a higher comp score. This is not an exact science, but you should be able to narrow it down to a 10k range easily. Look for similar square footage, same look, similar yard and comparable extras(garage, pool, etc).

Once you find a solid list, you'll know your, possibly new, ARV is accurate.

Thanks everyone for you helpful replies.  @Aaron Montague I followed your advice and pulled every duplex with the same number of beds and baths in the zip code. It turns out that my ARV is closer to 84K and not the 107k i originally thought. Luckily i got it under contract low enough to still make a profit.

@Dewarren Sanders how did you pulled those numbers?

Never use zillow to calculate your ARV. NEVER NEVER NEVER use zillow to cal acute you ARV

Do use zilliow to get a general ideal of the market ( and assume their zest-a-ments to on the high side) and gather great info on general info, pictures.  

True ARVs are gathered thur: 1)MLS 2) Haines Cris Cross 3) county records 4) etc.

Originally posted by @Dewarren Sanders:

Thanks everyone for you helpful replies.  @Aaron Montague I followed your advice and pulled every duplex with the same number of beds and baths in the zip code. It turns out that my ARV is closer to 84K and not the 107k i originally thought. Luckily i got it under contract low enough to still make a profit.

Well now that you have a more accurate ARV the deal isn't as good as it looked before. Not horrible but nothing to write home about for the investor buyer.

Doing a simple 70% rule calculation you would want to be under $34K to purchase.

I'm not in that market but I have the impression that it isn't that hard to get properties for better than the 70% less repairs formula.  How much spread do you have?  If you can lower your price by $5K or more and still do okay you will probably get a lot more interest in it.

Medium rre logo web rgb w motoShaun Reilly MBA, Reilly Real Estate, LLC | [email protected] | 1‑800‑774‑0737 | http://www.MassHomeSale.com | MA Agent # 9517670 | Podcast Guest on Show #43

How many buyers have closed deals in your target in the last 90-120 days. Those are your buyers. Drive to those props and meet the buyer or their rehab crew and let them know you have a great deal in the same area.

I'm assuming that since you have a prop under agreement you now have a window of time to close. Also try Craigslist.

I've been taught you have to have buyers in place 1st, then find deals.

Keep us posted and God Bless.