Would You Buy This Deal in Southern CA

Question

WOULD YOU BUY THIS DEAL?

4br/3ba SFR

1900+ sqft

Lot: 6,655 sqft

Built: 1988

Location: Palmdale, CA (Far East side, Think 50th and Ave R) - 60mi Northeast of LA

Needs $50K renovations (big ticket items - Kitchen: refinish cabinets (not replace), stone counters, tile backsplash, faucets, appliances, tile flooring, recessed lighting - Master Bath: Stone (or less expensive alternative) counters, recessed lighting, new double mirrors, double faucets, glass shower enclosure, new tub, new toilet, tile flooring, replace broken windows - Back Patio: Refresh and replace all rotted wood on patio cover; paint) -- Main level: laminate wood flooring -- Upper level: Carpet throughout) - Roof Good, Plumbing good, HW Heater may need to be replaced, HVAC will need inspection and cleaning. Most importatly, in this area, the AC works (100+ degrees in summer).

Seller owns outright - pending title search for liens and such

ARV: $250,000

Could Rent for $1800+/mo

Purchase Price Option 1: All Cash - $125,000

Purchase Price Option 2: Owner Financed - $150,000; 10% Down; Balance financed at 6%/mo for max 6 months; 6mo Balloon

Purchase Price Option 3: Owner Financed - $162,500: 0% Down; Balance financed at 6%/mo for max 6 months; 6mo Balloon

WOULD YOU BUY THIS DEAL IN ANY OF THESE SCENARIOS? If not...why?

John Mich · Answer

Hey Andy, I'm definitely interested in a meetup if one ends up happening. I'll check that old thread.

Delayed purchase financing is a Fannie Mae program that allows you to cash out of a property before the traditional six month waiting period you'd have with conventional refinancing. It's helpful if you're using hard money with a six month limit and want to BRRRR the place instead of flipping it.

Erik Bottema · Answer

Hey Andy, by seasoned, I mean you most likely will want to hold 90+ days prior to putting under contract to the end buyer (fha anti flip requirement)

If you end up wholesaling it, please let me know. I have cash and close without nonsense...

Andy Cross · Answer

Hey John...I remember chatting with you last year sometime about potentially getting a meetup started out there. I think they are trying to start the conversation again!

There's a good change I may have to wholesale this lead (its not a deal yet) if I get it under contract. However, my ultimate goal is to fix/flip this one. But just wanted to see what more seasoned investors thought about what I know about the property so far.

What do you mean by "delayed purchase financing?"

Andy Cross · Answer

Hey Erik, you're right about the AV being a weird market. I do know it well - since I grew up there. And I spent a good portion of early last year immersing myself in the market. Tell me more about how this property "will need to be seasoned."

Erik Bottema · Answer

Andy sounds decent. AV can be a weird market though if you don't know it well. Also, most buyers are FHA so it will need to be seasoned.

Sam Shueh · Answer

My take is you can spend minimum amount of update until you are ready to sell it. You do the cosmetic stuff last. May be rent it out and put it on the market. My impression is home price increases will be slower.

You are unlikely to get quality tenants for that town, unsure about that neighborhood. Long term prospect is unknown. I will cash out my equity in 1 year and go to a better neighborhood.

Jo-Ann Lapin · Answer

Sounds okay to me however without knowing you full financial make up it is hard to give a thumbs up. Happy to assist.

John Mich · Answer

sounds like a pretty good deal to me. 50th and R isn't too bad either. I'm sure you could find decent renters there if you were planning to hold it long term. Personally I'd try to get hard money and go with option 1, and then use delayed purchase financing to refinance once your rehab was far enough along to qualify.

Would You Buy This Deal in Southern CA

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