All Forum Posts by: Anthony Gayden

Thanks to all for the replies. I went ahead and proceeded with negotiations. We will see what happens at this point. 

Purchase Price $150,000

Closing Costs $3300

Repairs $50,000

total investment $203,300

After Repair Value $220,000 (I'm going with your lower ARV number to be conservative)

That means you really only were getting the property for a $17,000 or 7.7% discount from retail. That isn't exactly a slam dunk deal, especially since you were paying cash and you had to do an extensive rehab. 

In terms of rent, I personally don't think a 5.5% is very good and I expect more. 

@Keri J Perez

I have backed out on deals in the past, it isn't the end of the world. I will say one thing though. Seeing as how this is your very first deal, do you think you may be over analyzing it? No property I have ever bought has been perfect. There is always something wrong. My wife freaks out when she sees the inspection reports for the houses I buy. She always is encouraging me to back out. She is scared to death of some issue that will somehow bankrupt us. 

After we close and do some basic repairs, she always comes to realize that had we backed out we would have missed a good deal.

Originally posted by @Shardae Robinson:

I am learning a HUGE lesson in market value versus assessed property value. Just purchased a foreclosed home in Jackson, TN via auction in an area where the market value of homes (what they are suggested to sale for) is way below the assessed value of the property itself. I got a 1600 sq.ft. 3 bed/2 bath SFR built in 2006 for $61,400, but assessed property value is $106K. Sounds great, BUT the problem is the market value and comps in this part of Jackson, TN are around my purchase price. My dad is a contractor and he could not build this house for what the market value is suggesting. Please check out the pictures to see for yourself.

There are several issues at play in this area negatively affecting the market value and potential price point: 

1. No newer homes have sold for a long while within 2 miles or so (but there are similarly aged, nice homes on that street)

2. The older homes of similar size are so outdated and in need of repair that they won't sale for much; hence, low comps

3. This part of town, North Jackson, is on the list for revitalization by the city; market value is NOT this low for the entire city

I'd love to hear your opinions about what to do with this home and/or experiences with large gaps in market vs. property value. Any tips? Is it too much to think I could sell for closer to $95K with no similar comps in the area?? I would prefer to flip it and sell after doing a little bit of updating (add vinyl plank floors in common areas, appliances, and paint entire interior); however, there is great return as a rental property as well with monthly rent ~$900/month. 

I am not at all disappointed with my purchase. This house is almost turnkey and I love the street it's on. Owners clearly take pride in their homes. It's just the market value that I'm struggling with. Any thoughts are greatly appreciated! 

Front Side Back Bedroom Laundry

 The assessed value by the county is 100% irrelevant. I would be willing to bet that the location this property is located is in a higher crime/lower income part of town. I have seen this here as well. Newer development in the "hood". The property values are still rock bottom because no matter how nice the home, the location is what dictates the price. 

Have you considered keeping it as a rental?

I graduated community college with an associates in Computer Information Systems back in 2000. I work in law enforcement. I invest in real estate on the side. Basically I wasted years in college.

I can't tell you where to invest because I don't know your goals overall, but I own houses in both Douglas and Sarpy counties. Property prices are still relatively low and rents are decent. I think Omaha is a great city to invest. I have experienced a lot of appreciation in just a few years, which surprised me because I didn't expect it here.

@Russell Brazil

I will take a closer look at the contract, however I do not remember anything stating that we would not be able to negotiate.

@Theresa Harris

I do have an inspection contingency in the contract. I agree that they are unlikely to go for it, however I do want to try anyway since the repairs throw my numbers off. 

The home is a good deal, but not a slam dunk. The offer is for approximately 80% of the ARV. I went in realizing that there were repairs totaling around $10,000 needed to the property. The additional repairs could add $5000-10,000 to that amount.

This is a rental and I do plan on holding it long term, however it throws off my numbers.

@Jaron Walling

I agree with you, both parties need to win, and if I feel like I am going to take a loss, I will back out.

@Aidan Mulligan

I was hoping that at least my own realtor would understand but he seems very reluctant to do any of this. 

 I agree with what you are saying. I believe that there are far more inefficiencies in the single family market and what that means is that there are much better deals to be found and more money to be made. That is why I decided to go all in with single family rentals. 

I seriously looked at a few 5+ unit properties a couple years back and I was confronted with a few things that made it difficult to make the deals work.

-20 year amortization

-30% down payment

-interest rate that was higher than the rates for single family

-5-7 year balloon

-net worth requirements to qualify for loan, had to have net worth equal to property value

-required to use third party property management, even though I already owned and managed several other rental properties

-more costly inspections and environmental reports needed

These are factors to keep in mind when investing in multi-family, especially as a smaller investor. The barriers to entry are higher.

I am in the process of buying my sixth investment property. All of my other properties I have insurance coverage for replacement cost, but on this property I am considering getting only cash value coverage. What is generally recommended for landlords? The cost savings is about $200 a year. 

I have a house under contract here in Omaha. I agreed to buy the house as-is with no repairs to be done by the seller. I had a home inspection and discovered a couple of repairs that will cost me a few grand. I had based my purchase price on the fact that I knew I was going to have to do some repairs and I had budgeted to complete those things I had personally identified. These repairs go beyond my initial planning and budget and my offer would have been different had I known about them.

After the inspection I told my realtor that I wanted to negotiate based on this new information. He immediately starts telling me that I agreed to buy the house as-is with no repairs, therefore it would be a bad idea to go back and ask for anything. I remind him that I am not asking for repairs, only a credit and that I will do any repairs myself.

Am I in the wrong for wanting to negotiate after the inspection? Why would my realtor believe that this was somehow unethical? I am looking out for my own best interests here and if I can't get the numbers to work with these new costs, I will back out completely.