Deal or no deal?

Question

Hello Bp!

I'm am currently in the process of putting a home under contract,however I'm not too sure if this would be considered a deal. These are the numbers:

ARV: 100k

Repairs: >5k

Price: 73k

The home is tenant occupied and is renting for 900$ monthly. Current tenant can also potentially turn this deal into an owner finance if buyer is open to it. I would really appreciate your opinions. Thank you.

Steve Vaughan · Answer

I would buy a property like that from you in a heartbeat for a buy and hold.  Not enough room for your average flipper.  Find a buyer looking to increase their rental portfolio.  Go to a REIA meetup and advertise it.  Other landlords in the area looking to expand?  Call some PM co's and see if any of their owner's are trying to grow @Josselyne Lugo!

David Dachtera · Answer

@Josselyne Lugo,

Well, not $20K, really.

Most properties don't sell at or above their asking price, and asking too much from the start means the property won't sell right away.

It's actually $20K minus closing costs, minus your wholesaling fee minus any other fees and costs.

That is to say, not enough money there to make it worthwhile ...

... unless the deal meets the end-buyer's cash-flow criteria or there is some other redeeming quality in the deal making it an attractive buy-and-hold, fix-and-flip, rehab, etc.

Hope this helps...

Brent Coombs · Answer

@Josselyne Lugo, no deal. (Well, you asked)...

Doesn't meet the basic wholesaler "rules". Your "Maximum Allowable Offer" should be no more than 70% of ARV, INCLUDING repair costs. (Also, just how much "greater than" $5k are those repair costs going to be)?

Circa 1%/m gross Rent is not the greatest incentive if you are trying to find a Buyer to pay you more.

If the Owner wants to sell, and the Tenant wants to buy, won't they find a way to bypass you? That's just a few thoughts...

Josselyne Lugo · Answer

Hi Kyle the property is located in Alamo it is near the highway and current tenants would be willing to pay $1000 to stay in.  The property is still available

Kyle Leinart · Answer

Where is the home located? I may be interested if you still have it available. As long as the numbers are there, comps and repairs, and the property is in a good location, I think it would be a decent deal for a buy and hold. For a flipper you would need to be all in (purchase price, repairs, and your wholesale fee) at 70,000 or less.

Brent Coombs · Answer

Aah, it makes a BIT of a difference that you quoted your SELL price rather than your BUY price, and that the repairs are estimated at "LESS than" $5k rather than the "greater than $5k" that you originally quoted.

But, rehabbers might still generally like to see that THEY are paying no more than 70% of its ARV, including their rehab cost.

If you are saying that its ARV could be MORE than $100k because of its "extra room", can you justify that? None of us can answer that for you. All the best...

Josselyne Lugo · Answer

Thanks for your input Steve. I guess I would need to target buy and hold investors. Im used to targeting rehabbers. I will give it a try. The next REIA meeting is in a couple of weeks so I will see how it goes then. Again thank you so much.

Josselyne Lugo · Answer

I don't want to lock up a deal that would give me a bad rep as a wholesaler (Not bringing valuable deals to the table)

Josselyne Lugo · Answer

Hi David thanks for your input.  The original asking price was 124k and the 73k includes my wholesale fee of 3k but I do see how its too close to not making a time worthy deal for an investor. The ARV is 100k but there was an extra room added to the back of the house plus a storage so it adds value to the house not sure how much value though.  As for the tenant the lease is over so if the investor just wanted to a quick fix and flip the tenant could get there legal 30 day notice to be out but I see what you are saying. Im not sure if i should peruse it or not.

Josselyne Lugo · Answer

Thanks for your input Brent. I thought it might be a deal because if it was sold it could be a quick 20k profit. It is no more than 5K the house was recently fully renovated with the exception of one room. The reason the owner does not want to owner finance is because she is older and does not want to be a landlord anymore.

Deal or no deal?

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