Is this a good, bad or ugly deal?

Question

Hello BP friends,

I'm trying to gather some opinions on my first whole sell deal, here goes:

Three townhomes in a neighborhood of only 17 townhomes that are barley 4 years old with no repairs and the tenants want to stay. They are currently being rented for $825 each. The tenants would be willing to lease option from the new owners.

Seller wants $112k each with $5k down as earnest monies. They have been listed for $150k and one just sold in June 2014 for $138k They are all 3bdrm/3 bath 1100 sqft.

I tried to talk him down to $100k but he bit my ear off. He said he doesn't have anymore room to budge then the $112k. They are nice and the area is nice also.

Does this sound like a good, bad or ugly deal?

Thanks

Tim Leslie · Answer

Chanda,

Like others have said there isn't a deal here. The cashflow would be minimal for a buy and hold investor, especially depending on the HOA fees. Keep on looking though...plenty of good deals out there!

Scott Stevens · Answer

Chanda,

See the 1% and 2% rules on here. Buy and hold investors would likely laugh at those numbers.

Chanda Titus · Answer

Thank you for helping me out with this. It's nice to receive feedback from those doing the business daily.

Ellis San Jose · Answer

@Chanda Titus

The deal looks pretty skinny.

If you sold the property to a buy & hold investor at zero profit to you, they would only get a 4% annual return ( it may be even less depending on HOA fees)

You wouldn't be able to flip this to any investor that I know.

A long shot would be to put the property under contract & delay the closing date as long as possible & then do a hopefully do a quick assignment to a retail buyer a make a profit.

I bet there are better deals out there.

Curt Davis · Answer

Well lets see, the seller has to get $112k and then you have to make a little something so to whomever buys them from you will be paying more then $112k.  If they only rent for $825 per unit, I would have to say these are not good deals, not even close.

The cash flow would be terrible based on the returns one would get.

I dont see a deal here, move on to the next.

Good luck