All Forum Posts by: Chris Pasternak

Liam,

Owner financing could be a good alternative selling method. I prefer buy and hold much better anyways. I'll have to brush up on Dodd/Frank however.

The plan is not to gut the kitchen/bath. Biggest expenses projected are roof/carpet. Only outsourcing carpeting and plumber/electrician inspect.

Daren - It's a foreclosure and they have not accepted the offer yet so I am waiting to hear back. I wanted to post details for thoughts from you guys to see if everything made sense, or didn't.

Adam,

Insightful thoughts, thank you. I really don't even know if PGH has condos haha. If we do, I haven't heard anything about these rules. I had not thought about financing under 50k issue but that is a good point. I have not had a plumber view the sewer yet, however, I had a few others look at the sewer back up with various experience levels and ranges and they all believe it to be backed up. A plumber will be my first expense however, prior to submitting anything official for this deal. Lastly, you make a good point about 8.5k going up in smoke fast...

Thank you

Daren - I did,

"11k - 8.5k (buying costs, 7.5k for purchase and 1k for closing (cash)) = 2.5k"

I wrote it as "buying costs"

Jacob,

Point taken on the deal analysis experience, however, If I can feel comfortable enough that my numbers are definitely conservative in nature, that combined with the small size of this property allows me to not be overwhelmed myself with the work required in it.

As for the holding costs:

I accounted for 1,405 in taxes (a whole years worth)

1,200 in utilities (four months worth?)

2% rule says you need 11k in monthly rent for this to be a solid deal if you purchased at 550k. I'd say you need a serious price cut or to move on. Not only that, but you need 15k in repairs? Meh.

Moreover, the current seller's purchase price (305k) and rents you project (4050) don't warrant a deal either!

What do you guys think? This is my first go at analyzing a flip. Overall, I like to be on the conservative side. A bit about the house: 2 bed 1 bath, half duplex, 830 sqft. Right now it's listed at 25.9k with a terrifying sewer backup overflow covering most of the basement floor, keeping most from going further than opening the door and smelling its stench. I have a ARV of 35k based off of sales in the neighborhood. I've been advised it could sell for upwards of 50k if rehabbed however. Most work is cosmetic in nature. Biggest costs will be the roof, and carpeting.

ARV: 35k

35k x .7 (70% rule) = 24.5k

24.5k - 11k (repairs) = 13.5k

13.5k - 2.5k (holding costs, 4 months a good timeframe?) = 11k

11k - 8.5k (buying costs, 7.5k for purchase and 1k for closing (cash)) = 2.5k

2.5k - 4.5k (selling costs, 4k for commission, 500 for warranty) = -2k

35k - 24.5k = 10.5k (profit) - 2k (overages) = 8.5k (final profit)

It doesn't look like the greatest profit, but my main goals going in to this is to not take a loss on this venture (hopefully making a bit on the way), and to learn a tremendous amount about the ins and outs of a house (myself and a couple friends will be doing all the work except for the carpeting, and plumber/electrician inspection).

Please let me know what you guys think and if you require more info.

Sorry -- Its currently a fully occupied duplex. We have 3 years to lease and then face a balloon payment for the remainder of sellers mortgage balance.

We are doing a lease/purchase deal. I fronted initial 3k down payment. He heads up the property management with me being secondary. He pays back 1,500.00 of down payment by August 1, 2014.

Do you suggest an LLC over a simple written agreement signed by both parties? If so, why?