Is this a good deal?

Question

Hey guys!My wife and I just put 2 houses under contract yesterday. I'm adding pictures, below. The first house is this yellow brick 4 bedroom/1 bath with an unfinished basement.The second house is the red house behind it (2 houses on 1 parcel) and it has 3 bedrooms/1 bath and a garage that needs fixed. They each have separate parking next to the houses, so even though it looks like they share a driveway, they don't. The red house behind it has a little alleyway that leads into a small driveway to the left of the house.OKAY, so down to numbers. On the tax site, it is appraised by the county as the following: Base Year of Valuation: 01/01/2003 Current Land: 15,440 Current Building: 71,260 Current Total: 86,700 The seller originally wanted $90,000 for both, but we weren't able to pay that. They called us back 3 months later and accepted our offer of $50,000, because they became very motivated due to some family health issues and an ailing grandmother, who owns the home. OKAY! So we got both for $50,000, and the insides of the houses are completely livable. Just need some cosmetic work such as paint, maybe some flooring, outdated borders around the walls removed, etc. All in all, it shouldn't take us more than $5,000 to fix up both houses. (The inside of the brick house is gorgeous. Beautiful 1920's woodwork, brick fireplace, high ceilings, open floor plan. Second house is solid and nice too, doesn't need much at all, carpet won't even need replaced. )The house to the left of these sold for $138,000 in May 2005, pic below:(I normally wouldn't worry, but we had a realtor around here tell us that she thinks both houses would only be worth $70,000 because there are 2 houses on 1 parcel and its hard to pull a comp for that, but that would be her guess, and that worried me. How would that be possible if the house next door sold for $138,000? And the county site has ours evaluated for $87,000? Aren't the county sites low?Anyway, the neighborhood is good, I'd say a low B or high C. Rent should be $700-$850 per house.Would you have bought this deal for $50,000?How do you think we did? We close tomorrow and are paying cash.

Jordan Archer · Answer

@Joshua D.Forget wholesaling it...KEEP IT!This is a great cash flowing multifamily property. Especially at the price you acquired. Besides, I guarantee there would be a buy and hold investor in your area that would love the properties if you did plan to wholesale.Good luck!Jordan

Joshua D. · Answer

Will do. Thanks guys. We close today at 2, so I'll post some pics of the inside today once we get in. Wait until you see the original 1920's woodwork and high ceilings.....gorgeous stuff.

Jason V. · Answer

It's hard to tell from the picture: are all the houses on the street as close to the ones behind them as these two are? If this is typical, it's probably not affecting value. If it's not, well, I wouldn't like having someone live in my backyard. Probably won't affect rents, but I think it definitely affects resale. As far as valuation - check recent sales. If you're in a dense area, there were probably quite a few in the last year in that neighborhood. That's the best indicator you'll find - for reasons Brent explained well.One last quibble: the 3/1 might be OK, but the 4/1 will probably give you some trouble. Either the bathroom is on a different floor than the bedrooms (common in very old homes) or there isn't a toilet on the first floor. Either way, not good. I believe the term some folks use is functionally obsolescent - if you're doing a rehab I would give serious thought to adding/moving bathrooms (assuming the whole neighborhood isn't like this. If it's normal, I'd do it anyway to make it more attractive. )All in all, likely a very good buy to get these two for 50k. Good luck!

Brent Coombs · Answer

All the usual suspects who might normally respond are likely not breakfasted yet. All the best...

Brent Coombs · Answer

In between 2005 and now we had this thing called the Global Financial Crisis, which arguably was caused by just such sales as the next door one - to people who couldn't really afford to make the repayments (multiplied by MILLIONS of similar sub-prime loans within a short period of time, just before the banks realized {or, meticulously planned} - oops - we need our money back)!At the time, who couldn't see that crisis coming? (It was obviously just a matter of when, not if).But by 2011, the pendulum swung too far the other way, meaning Banks were offloading their foreclosed-on properties for much less than their "real" value. THEN was bargain-hunter heaven!Now? True value is often determined by a block by block analysis - which we can't really answer for you without knowing the neighborhood grading of THAT particular block.On the surface, your numbers look REALLY good. I'm going to say: congrats! Cheers...

Joshua D. · Answer

@jordanredar Thank you so much Jordan! We are really excited about it. We just found out yesterday as well that the first brick house has 100% original oak hardwood flooring underneath the carpet, so that was great! We are going to rip out the old carpet strip by strip and wash down the wood underneath and leave it as that, we are thinking. Always great to hear other investors who also think we got a great deal, we are feeling pretty lucky on this one so far!! Going to keep it, thanks Jordan! Hope to maybe meet up sometime down in Stuart, we are down there several times a year!

Joshua D. · Answer

UPDATE- Closed on it for $48,000. Got both houses. Escrowed money for the taxes, so that's why it wasn't as high. So far, super happy with our purchase and decision. The houses are in VERY good shape and it seems like they were updated in the last couple of years here and there (new vanities, shower, light fixtures, built-in hubs, etc.) Seems like someone was going to attempt to fix them both up and then didn't put the time or money into it, for whatever reason. The one caveat we've come up with is that the water supply is not separately metered for the 2 homes, although every other utility there is. Worth getting a separate meter on it? Also, the one house has a crawl space and it concerns me the possibility of freezing pipes in the winter. Suggestions? Last one. Because the 2 houses are on the same parcel, the yard is shared. Would you suggest we split it with a fence so each house has its own "side" of the yard? Would this be something you'd want?

Jason V. · Answer

Probably - in my area I just talk to the code enforcement officer, but the bigger the area, the bigger the office.

Harrison D. · Answer

Not at all familiar with your area, but I just split a parcel into 2. You have to find out what the zoning your house is, then as Jason V. suggested you just need to find the minimum lot requirements, setbacks for that specific zoning. Also do both houses front a street? If the one in the back doesn't front a street then the city/county might not allow you to split the property into 2. I would just give the county zoning office a call. Harrison

Joshua D. · Answer

Would we just get ahold of the zoning office for that? Or who would you contact to try having them split?

Base Year of Valuation:	01/01/2003
Current Land:	15,440
Current Building:	71,260
Current Total:	86,700