Deal or No Deal??

Question

*No copyright infringement intended*

I have a deal under contract with HUD and want some of you bright investor's opinion on today's version of deal or no deal:

HUDS Asking Price: $45,000

Accepted Offer Price: $36,500

Total Net to HUD: $38,830.20

ARV: $90k-$100k

Repairs Needed: $0-$10,000

I say $0-$10,000 because the home really needs no work but one of my exit strategies consists of painting, redoing carpet, light fixtures, and a few appliances, you know, cosmetic stuff.

Feel free to take a look at the property since its mine: (1131 New York Ave, Knoxville, Tn)

So, deal or no deal????

All comments and questions welcome!

Account Closed · Answer

I say no deal. There isn't a single comp I can find for the last year over $65K, except for new construction.  One was by Habitat for Humanity, for $125K and one was by a city program and sold for $110K.  That property isn't comparable to new construction.  From google maps the property is next door to a disaster area. Is that still the case?

It might make an OK rental, depending on the neighborhood. But I think it's not a flip candidate and is being sold for current market value.

Just my opinion.  You have better access to comps and what's going on in the market.

Account Closed · Answer

I wouldn't buy a SFH next to towing yard filled with junk unless I knew I had a buyer for it. That neighborhood is mostly $20K comps.  I don't want to own an OK property in a very low valued area long term so I would need to know who my buyers were.

Where I am rental investors compete to buy from HUD, so I can't buy low enough to re-sell to them.  I find it difficult to believe that isn't true where you are.

Keep us posted.

Shaun Reilly · Answer

What are the condition of the ones that are selling in the $60s and $70s?  If they are disasters that are uninhabitable then fine those aren't comps.  If they are like yours, or even better, then you can't dismiss those.  Also even if they aren't great but just need some TLC to be rentals you are not going to be able to sell a place to a cash flow investor at the top of (or even 15% below the top of) market value since there are just to many other options.

It may be good as a rental for what you are getting it at, or even a bit more, but the spread is probably to small to rehab and resell as a rental, unless you find a rube for a buyer.

If you don't want to hold it as a rental you might be able to wholesale it to a buy and hold investor for a couple grand under the HUD list price and make a few quick bucks as long as you have the funds to close.  HUDs are easy to double close for a wholesale as there are no deed restrictions or any of the BS you see with most typical REO places.

Davonte Durden · Answer

@K. Marie Poe

The numbers i pulled ($110K being one of them) i thought stood up pretty well. I also seen the 65k as well as those in the 70k's and 90k's. I plan on doing the cosmetics and marketing as a rental to investors. My price will be about 15%-20% shy of market value.

Thanks for your opinion, i always love to hear what other investor think of deals.

What would you do if you owned it?

Davonte Durden · Answer

Originally posted by @Shaun Reilly:
	As presented the numbers are obviously a slam dunk no brainer killer deal.

I love your choice of words! Thanks.

HUD does this with houses all the time as i have noticed. My comps come from a few recent sells in the area just shy of the new year. They list a home based on current market, sales occur, we reap the benefit.

Luckily i know how to bid on these deals thanks to a friend in the business.

If you know of a private money lender, do tell.

Thanks,

Davonte

Shaun Reilly · Answer

As presented the numbers are obviously a slam dunk no brainer killer deal.

However I have a hard time believing those numbers.

Why would you be able to get a place for <$40K that is worth more than double that with little to no upgrades?  Maybe if you landed some killer off market deal, but everyone in the world had the chance to look at the place.

Might be a great deal but how confident are you of that ARV with the work, or lack thereof, that you are saying?

Davonte Durden · Answer

@Paul Jamgotch

Thanks for your input. I don't plan on staging. Most I'm doing is cosmetic work to up the value and marketing as rental ready.

I've also been looking for private money investors for this deal and others in the future. If you or anyone you could think of would like to make great ROI let me know.

Thanks,

Davonte

Paul Jamgotch · Answer

@Davonte Durden

Looks like a deal to me. Are you going to stage or anything? I'm curious how you will make this stand out from the $45K listing hud had. Best of luck!

Deal or No Deal??

Most Popular Reply