Deal to be made but im stuck.

[Jimmy Castillo]

Hello BP members. Extreme podcast fan here. I’ve listened to over 200 of them. Not an avid forum poster yet. Things might change though. I have this duplex deal that I’m not quite sure how to go about. The current owner does not want the property. It was inherited by the seller when her ex husband passed away over ten years ago. Never cared for him nor the house. Here comes me. Caring about cash flow. Seller does not want to be bothered with deeds inspections & the town. Asking me how is the process of buying a house cash. I just said we would get an attorney & the money would be wired to the account of their choice. I Did not go into details as I don’t know the details. I will search the forums for more info in the meantime. Is there a descriptive post somewhere?

The duplex needs a semi full rehab. First floor is a one bedroom apt that needs the whole works since it’s still stuck in 1950. Im thinking it needs a new floor plan. Bathroom might be moved. Not sure how to find the bylaws for adding an extra room in the basement if possible. Second floor is a two bedroom apt that needs flooring, cabinets & counters. Also might want to add a appliances & a hvac to both units. Debating pros & cons with the hvac. Would like all inputs.

I’m finding it hard to find comps as well. This area is populated with other duplexes. The difference is those lots are wider & have more sqft of living space. I was thinking I can see the average of those comps & divide the avg sqft by the price. Would this be a sort of accurate assessment? One of my concerns is that this duplex is attached to other duplexes on both sides. Is this a big deal? All the comps have at least 5 feet in between each other. Sort of dense area. 30k pop per square mile and growing exponentially.

You might ask me how much did those attached duplexes sell for or what are their market values. I have seen that one of them sold in 2007 with a 80/20 loan of 375k in 2007. Price must have been extremely inflated. This area is booming. Close to NYC. Prices have surpassed the debacle of 08. The other attached duplex was last sold 20 years ago for 135k. No further info on that one. My rookie ARV estimate would fall around $325k being that no other 70+ year old duplex has sold under 370k. Im counting for the fact im 700 sqft shy of all the comps in this area. Should I be lower? Am I where I should be?

As per the duplex, Zillow says its 410 but it also says its a single family. No help there. Still looking forward to purchasing. Seller got a refi 2 years ago with an appraisal of 225k. Owes only 100k. Theres a deal to be made here. Hoping all your experiences can help.

There's a mass variety of duplexes in this area. From brand new to 10 years to 40 years to extremely old. Average overall price is around 500k. This house has to be in the top 20 worst house in town. I'm looking to make it better. With the variance in such a small crowded space I'm lost in sauce. Cant seem to trust my ARV.

Just to have an idea here, average price per sqft is around $225 making this duplex $400k. I can't go by that though being that this is one of the properties that brings the average down. Be nice if the ARV is even 50k shy of that.

So I’m thinking I offer the seller several deals. I have some saved up cash but will need some hard money to close this deal. I do not want to go through the bank process & discourage the seller.

OH! With overwhelming excitement of the equity I see, I already offered them 150k. I put in as much info as I knew on the BP calc. With 50k repair on the safe side. It had a 10% cap rate without raising rents.  I do not want to be stuck in analysis paralysis! I see the value. I want the value. I want to reconvene with the seller once I have multiple offers laid out on 3 contracts. Heres my go at it.

Deal 1. 150k with a sell it now button.

What I already offered which covers the 1% rule. Unfortunately, the seller was reluctant. Sent me a screenshot of a tax assessment that came in around 350k. Felt like I lost my chance. Then the seller says that they know that’s not the value. Now I’m back in. 

Deal 1.2. 200k

Bad scenario. Not quite sure if seller is dead set on that 225k appraisal. If so, I’m willing to offer in percentage increments til that much. Brings the cap down to a 5%. Currently has paying tenants. If i raise the rents it would cover the 1% rule & keeps the 10% cap rate.

Deal 2. 250k

I’d ask the seller to keep the mortgage. Do a subject 2. I’d refi out within a certain safe amount years. I would still need 150 which I’ll get from a hard money if so. Haven’t crunched those numbers. Would a negative cash flow for an unknown time period til the refi be bad? I don’t have the power yet to get a 30 day refi going. Would it be better to cash flow & just pay interest on the hard money? Or to actually pay down the hard money then refi out as usual when I’m able to. Do private money lenders give a loan on top of an existing loan thats subject 2? 

Deal 3. TBD

All advice and strategies are welcomed. All of my knowledge is from BP & YouTube. Would love to hear from people with real world knowledge.

Thanks for your time. Much appreciated!

JimmyC