Investor · Austin, TX · Member since 2020 · 223 posts · 83 votes
Hey all,
Here's the situation. My business partner and I submitted an offer on Wednesday last week for a SFH in San Antonio. The sellers countered and we accepted on Thursday. It is our first deal as partners.
We have signed on Thursday and they have yet to sign and it's already Sunday.
Friday my partner and realtor did the walkthrough. Needs significant work. Smells horribly.
Initial offer: $95,000
Counter: $102,250
ARV: $175-185K
It needs at least $40k of work.
Now the question is, do we just wait it out? My friends in Europe are under lockdown. They are forced to be quarantined already. Australia has talks of lockdown. I am honestly worried that US will eventually go under lockdown too.
What would you do? Walk away on the deal or go through with it?
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Move forward. This virus thing will be behind us a few months from now. There may be economic carnage but not everyone will be out of work, people still need places to live and it sounds like you have a deal with adequate margin. Regarding "smell", that can be mitigated. I'd be more concerned about any more major repair (electrical, plumbing, HVAC, roof, foundation, etc). If it has major issues, you can try renegotiating the price. (assuming your contract allows that)
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Move forward. This virus thing will be behind us a few months from now. There may be economic carnage but not everyone will be out of work, people still need places to live and it sounds like you have a deal with adequate margin. Regarding "smell", that can be mitigated. I'd be more concerned about any more major repair (electrical, plumbing, HVAC, roof, foundation, etc). If it has major issues, you can try renegotiating the price. (assuming your contract allows that)
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y
BRRRR is a long term thing and coronavirus will eventually pass. I would anticipate some extra costs upfront (harder to get work done, longer to lease, etc.) but assuming those extra contingencies don't ruin the deal, I would stick with the deal.
Investor · Austin, TX · Member since 2020 · 223 posts · 83 votes
6y
@Andrew Syrios @John Teachout
Thank you for your input. My other concern is this house, in the best case scenario would be out of pocket $11k after refi. We would not recover all of our capital. That’s the best case. Worse case scenario is that ALL of my cash will be tied up if we cannot refi for any reason.
Also, I will have no more cash on hand if I go through with it. None. As everything else is now stuck in stocks.
Never mind that we have also been seeing comparable houses at lower prices already...
Now to say those things out loud. I don’t think it’s worth the risk considering we will go under lockdown any day now.
Thank you for your input. My other concern is this house, in the best case scenario would be out of pocket $11k after refi. We would not recover all of our capital. That’s the best case. Worse case scenario is that ALL of my cash will be tied up if we cannot refi for any reason.
Also, I will have no more cash on hand if I go through with it. None. As everything else is now stuck in stocks.
Never mind that we have also been seeing comparable houses at lower prices already...
Now to say those things out loud. I don’t think it’s worth the risk considering we will go under lockdown any day now.
If in the best case scenario (and you rarely get the best case scenario) it still doesn't BRRRR out, then I would probalby walk.
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Alice Huang Leaving some money in on a BRRRR doesn't make it a failure. HOWEVER, you have to be really certain of how much you are leaving in and that you can continue your buying plans afterward. If you stressed tested your numbers, and you can't leave the $ in, then you need to get a better deal (reject the counter and go back to your original offer) or walk.
Things are shifting now. I would pencil in longer hold times (the labor force in many areas will be compromised here in the next 2-3 weeks). It will be short-lived if everyone does their part of the "social distancing". If not, we will see this drag on for months. I'm not saying this to stoke fear.... just reality as you have to have a good sense on how long this will take you to complete. For me, I'm doubling my hold numbers... it turns out to be shorter, GREAT!
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
6y
At the price you mentioned above, I would walk. NOT because of quarantine, but because it is not a great price. I would go back and offer 90k, not 95k. You think it is 40k,but it could be more. Closing costs will be several thousand $$s also. You are going to be all in at 90% of value before it is all done.
New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
6y
@Alice Huang I am in a similar situation in NJ. I'm still going back and forth on whether or not to let the property go with this whole virus going on. Mine is a triplex, but if I can't find tenants for several months that will make things very difficult. If nothing else, maybe I can use this to negotiate a better price? Who knows.
I think @Rick Pozos has a great point though. If, best case scenario isn't looking all that attractive, there will always be another deal (easier said than done, I know).
Wholesaler · Georgetown, TX · Member since 2014 · 15 posts · 3 votes
6y
@Alice Huang I am in the Austin area and I'm doing two rehabs in San Antonio, one is a killer deal that I most likely will BRRRR and the other after rehab take my money for my next property. I sense this current "not quite hysteria" we're experiencing will taper off soon, but if not, I don't see it lasting indefinitely. I'm curious what zip code your property is in?
Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
6y
I would have to agree with @Rick Pozos, that doesn't sound like a great deal on price alone. No reason to stop buying for BRRRR though, this should all be over within a few months.