Is this a good deal?

Question

I'm in Bergen County in North Jersey. The owner of the home next to me is moving out, and offered me the home before it goes on the market. The price offered was 260k, similar homes in our neighborhood are displayed as around 300k in zillow.com, however one similar to the one offered to me, just sold for 230k. I'm not sure how reliable Zillow and similar websites are due to this. However, I am interested in if putting an offer in or purchasing this home would be worth it.

I'm assuming I would have a $1500 mortgage payment. And maybe I could get a $1300/month rent. but that wouldn't make it worth it. These are just assumed numbers. However, if I could get a $1500 rent, why wouldn't the renter just purchase a similar home?

The other option would be if I could get the cost down to 200k and then rehab it maybe I could sell it conservatively for 300k.

Mainly, I'm simply just motivated since this home is right next to me, but I'm not completely sure if its a worthwhile deal.

Kevin Hill · Answer

Zillow is not reliable for values. Sometimes recent solds aren't posted on there for months and Zestimates can be dead on or way off.

$1300 rent for a whole house seems low. Depending on condition, location, bedroom/bathroom count etc, homes in Lodi rent for around $2100-$2200. Renters don't have the money for the down payment and/or can't get a mortgage, that's why they rent. Use a mortgage calculator to figure out your monthly payment. Make sure you factor in property taxes and home insurance.

Suril Dalal · Answer

Lots of good feedback here - some of which is quite aggressive. But theres some good things to note. 1. I need to walk through the house with a contractor, see what needs upgrading. This is probably not a big expense since what I have seen of the interior looks to be in fair condition. This could also benefit in negotiating to a better purchase price.

2. I need to look at more comps. I did see one sell (same number of bedrooms/bathrooms) on the same street for 230k like I mentioned.

3. I need to take into account possible rent and include operating costs/vacancy, I have been estimating 10% for these each.

I just want to reiterate that the house isn't on the market and I was just approached since I'm next door, so I just want to make sure if it's worth purchasing before it does go on the market and others scoop it up.

Thanks to those who offered kind constructive criticism. This was an interesting first post on BP.

W. Alex Benitez · Answer

I echo what many others are stating that there is a concern in the "deal".  The numbers do not lie and you must factor all factors (operating costs, vacancy rate, etc..)to analyze the deal.

In addition, know the local market and gather statistical conclusive data to come up with a more quantitative analysis. In your original post I noticed too many "maybes' "assumptions" and presumption.  Do your due diligence as numbers do not lie.  Get a reputable real estate agent to give you a more thorough comp.

It does sound like you are motivated which is great but just be careful.

Good Luck

Orkeem Davis · Answer

@Suril Dalal - Curious to know where you landed with your potential offer.  Just to echo some of there, RE education is key.  Do your due diligence!! I would not purchase a property just because it is next door to my own and the owner suggested it, unless there was truly a win-win solution. Do the present owners own the property outright free and clear?  @Samuel Barton great suggestion - learn about seller financing and find out if that is a viable option.  If it is, this could be a great deal.  Bottom line, you need RE education my friend.  Stay inspired.

Rupesh Mehta · Answer

Hey @Suril Dalal were you able to put offer ?

Thomas S. · Answer

If you are not in the market to buy a home as a rental or a flip being next door is irrelevant. These type of unplanned investments usually turn out to be disastrous due to the buyer having no knowledge of what they are doing. If you are looking to invest get educated about investing in real estate first before you consider buying anything. If you don't you could potentially lose everything. Real estate is not a game or hobby it is very serious business and very hard work.

Gennadiy Matusevich · Answer

@Suril Dalal   I used to live in Lodi, please feel free to reach out if I can be of any help.  I can also help pull comps from MLS for rents and recent sales.

Alex Shaughnessy · Answer

i don't know the area but it doesn't appear to be worth it. and Zillow is definitely not reliable

Is this a good deal?

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