First time Wholesale Deal Analysis - Paterson, NJ

[Dipo Aromire]

Called a FSBO sign while Driving for Dollars . Owner wants to meet tomorrow Saturday.

Smallest house on the street with 2 families and SFH. House has 1bd/1bd, LvRm, Dining Room, unfinished basement used for storage. Mother currently occupies the house but is moving to assisted living; son is looking to sell. Son's wife mentioned $99,500 asking price.

Ran comps with agent. No real SFH 1bd/1ba available. Closest comps are:

SFH 1bd/1ba $65k (Condo) sold on 11/21/2013...on 0.2.miles from target

SFH 2bd/1ba $65k sold on 08/05/2013...0.7 miles from target property

SFH 2bd/1ba $120K sold on 12/30/2013...0.6 miles from target property

My 1st strategy is to flip to a rehabber who can convert to a 3bd/1ba or 3bd/2ba (recent comps range from $143K for a 3bd/1ba to $175K for a 3bd/2ba (on the same street).

I don't have repair estimates yet but I'm thinking of offering the owner:

65K (ARV) X 70% = $45.5 less whatever I can guestimate repairs to be which i have no clue about. Assuming $10K repairs. MAO would $35.5K

My 2nd strategy is to lease with option to buy and then lease it out. Lease comps range from $800 - $1,000 per months. Even i can purchase with a conventional loan for $50K for 30yr term at 5%. (approximately $300 loan payment) + maintenance ($100) + property mngt ($100) + Taxes and Insurance ($300) it wold still cash flow positive. However, this is contingent on owner.

Am i missing something on either strategy? Thanks for the input.

[Steven J.]

I got to your second paragraph and stopped right away when I saw '1bd/1bath'. Is a 1/1 something you can sell in your market? My initial reaction is run away.

Seeing you want to flip it is maybe a possibility. That involves a lot of work and will surely cost more than 10k. You'll have a much longer time to flip that into a 3/1 and the extent of additions will add a lot of money as well. Seeing what your comps are I don't think the profit is there for you to get a wholesale fee nor a flipper to make a profit on that much work.

Maybe the 2nd strategy is a little better... maybe. But you are banking on a single person living by themselves for a long time. 1/1s just are not a popular home. Personally I would stay away unless you could get it for much much cheaper.

My guess is the seller has not done their homework and is not motivated. Thinking they can get nearly 100k for a single bedroom house when comps are nearly half that is something you can't work with right now. If you really want to stay with it I would suggest you wait for a long time and keep them on your radar until they are motivated.

My suggestion would be to walk away.