Is this a good deal?

Question

Hello BP fam. this is my first post as I'm a certified newbie. I'm learning how to evaluate deals and wanted a bit of help from the community. I'm not worried about "losing a deal" as I'm a couple months away from having finances available to deal. The property is located here: http://www.baltimorewholesalehouses.com/?cat=46&su... On the surface it is fully renovated, occupied lessee, neighborhood is not good, but not the worst, great positive cash flow, asking price is around 40% of market value (I'm figuring 90k). What am I missing here?

Do you all believe this is a good buy/hold deal?

What questions would you ask if you're unsure?

Why is this priced as such?

Just to be clear, I'm not soliciting a deal or partnership, or financing, or anything. I'm just wanting some insight on a listing such as this one.

Thanks alot.

Do you all believe this is a good buy/hold deal?

What questions would you ask if you're unsure?

Why is this priced as such?

Just to be clear, I'm not soliciting a deal or partnership, or financing, or anything. I'm just wanting some insight on a listing such as this one.

Thanks alot.

Ned Carey · Answer

@Ken Seveur Welcome to BP. You are smart to start asking about deals like this in advance. I would also suggest if you ever get a chance to visit an investors property you do so and ask lots of questions.

Based on cash flow only, this is a good deal. The taxes are low too. That adds probably close to $1000 extra cash in your pocket a year compared to my average rental.  I know a few people who do very well with this kind of deal.

You are right, this is not the best neighborhood. In fact just Google street view the other end of the block and you can see lots of boarded up houses. Neighborhoods like this can be more work to manage because the best tenants want nicer safer areas.  Section 8 can make it LESS work because you do not have to fight to get the money.  Hope that it is Section 8 because a market tenant may not stay long. Anyone who can afford $1300 a month has better neighborhoods to choose from.

A risk in Neighborhoods like this can be that if the property goes vacant it can be tougher to rent and it can be subject to being vandalized.

Your $90K retail market is way off. Trust me the seller wouldn't sell for $40K if he thought he could sell for $90K.  There is some new construction near there and that may be what you saw with higher values. Or it could just be a fluke.  Maybe it is because the market has heated up and people are simply paying too much. Just because one fool paid that much doesn't mean someone else will.

I think the price seems fair based on what I can see. That does not mean it is the right property for you.

Nabeel Elnahal · Answer

Good morning Ken,

This seems like it could be a good deal, but I'm not sure that your estimated pricing for the fair market value is quite in line at $90k.  If I may ask, how did you come to that number?

When you're talking about a place cash flowing right away, in today's market, that's probably already a good deal.

What's your current experience in real estate investing, particularly managing properties?  A lot of times, experience, and more importantly filling in gaps with the right team, can make a decent investment good or a good investment great.

Have you had a chance to review other items like expenses related to the property, or do you yet have an idea as to the condition of things like the roof, hvac, and other potential capital expenditures that would have to be taken care of?

Ozzy Sirimsi · Answer

@Ned Carey is right and  didn't leave any room to add anything to this , explained every angle.

All I can say is Welcome to BP!!!

Ola Dantis · Answer

@Ken Seveur Welcome to BP! Good thing is everyone starts as a newbie :)

I took a look at this property, and I suspect that it may require a more hands-on approach from a management perspective.

Undoubtedly, the 90k estimated value is inflated, and the true value is somewhere around 50-65k.

This isn't a good or bad deal; the main question is are you ready for a more hands-on management? Oh also, you gotta visit the property before you buy.

Hope this helps. Goodluck. Thanks! — Ola

Eric G. · Answer

Hi @Ken Seveur

It kind of concerns me that this property is only "Lead Safe" and not "Lead Free" after what they're describing as a "full gut job". Honestly, the "full gut" projects I've worked on were mainly to get rid of any potential lead (among other things) from the property. In my opinion, this home would not be valued at 90K despite what you did to it. In fact, I don't think anything has sold over 77K in the last year and it's a bad neighborhood. Let me know how it ends up going if you pursue the property I would love to see the outcome.

Best of luck,

Eric

Ken Seveur · Answer

@OzzySirimsi thanks for the welcome confirmation. Im gaining a bit more confidence everyday by analyzing properties, listening to the podcasts, and asking questions

Ken Seveur · Answer

@NedCarey thanks for the insight and suggestions. I know you post often and like many other investors who post on this forum have a great deal of credibility. Thanks

Ken Seveur · Answer

@OlaDantis thanks for the reply. Would you mind drilling down a bit your thoughts on hands on management? Do you mean in terms of the neighborhood/tenants, wear and tear? Or in terms of section 8?

Joseph Luht · Answer

The numbers look good, but you really have to go there and see it. Make sure that block isn't the worst block in the area. Also, pictures can be deceiving, so make sure the house actually looks like this.

Ken Seveur · Answer

Thanks @Ericg. I' not perusing this deal. I just wanted a bit of education on what makes a "good deal" at least from wholesaler.

Is this a good deal?

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