Deal analysis on my first potential wholsale lead?

Question

Hello guys, I'd like some analysis on this wholesale property I have an appointment scheduled for tomorrow to see what I could offer.

Property info:

2 bed 1.5 bath

1311 Sq Feet

estimated ARV $75k-80K(based on a 2 bed 1 bath selling at 75.9K in december and a 3 bed 2 1 1458sq feet selling for 84.5K last september. Those were the only comps I could find within half a mile.

Estimated repair costs 10-12K based on what seller mentioned over phone, would have to recalculate after seeing property

rents currently for $750/mo

Has had long term tenants in the property for a while.

Seller info:

Is asking $45k, havent been out to see the property yet so I'm hoping to be able to negotiate him down to maybe 30-40K tops. I'd like to make at least $2k on this property for my first wholesale fee. I think I'd be able to get him down in that range and still make a profit on this. What do you guys think? I can provide some more info if needed.

Thanks!

Francisco J Delgado · Answer

Hey everyone, update on the deal. Seller and I could not reach a price that I felt I would be comfortable wholesaling the property at for now but he told me to keep in touch in case he wants to sell later down the line. He is slowly getting tired of being a landlord so i'll touch base with him once or twice a month and keep the lead warm.

Thanks for all the help with the deal analysis, it definitely helped being able to negotiate in person as well. I'm looking forward to getting that first deal locked in soon hopefully.

Hattie Dizmond · Answer

@Francisco J Delgado Hello.

I'd have to have a little more detail, and feel free to PM with those, to give you a solid opinion on the deal.  Just high level...

I completely agree with @Crystal Smith about the need for additional comps.  With that said...just guessing I'd go with $80k.  That means you would need to get it under contract for not more than $42k to hit the 70% - rehab target and build in your $2k wholesale fee.

That's going to put the property right in the 1% range for a buy & hold, which is the only place I see any real market for this type of property.  There isn't enough margin on a flip (~$12k max at the ARV we're using for discussion purposes) for most investors to take on the risk, particularly since I feel comfortable this property is probably in a less desirable area.

For a buy and hold investor you're looking at a (again, I'm guessing based upon limited information, and a hunch that the property taxes are in the $1200/yr range.) potential cash flow of just under $200/mo net.  That will work for some buy & hold investors, but not for others, so your pool of potential buyers just got smaller.  Add to that the fact that the property probably feeds schools below a "6" on GreatSchools.org, and you have further reduced your pool of interested investors.

None of that is said to discourage you, just to make you aware of the reality of the situation.  So, if you are going to put the property under contract, you need to be super aggressive on getting the price down, and you need to make sure you give yourself ample time to find a buyer.  This isn't likely to be a property you're going to move in a few days.

Again, feel free to PM me, if you'd like to discuss the details of this particular deal.  Depending on the exact location, there may be other avenues.

Good luck!

Francisco J Delgado · Answer

Hey Tom,  the weather gotten pretty bad that day,  I made it to the house but the seller was stuck in traffic.  We rescheduled for early Saturday.  Since then I've been doing more research and feel better about making the offer and getting it under contract.  I'll update after the appointment tomorrow and let you all know.  Wish me luck!

Tom S. · Answer

@Francisco J Delgado What happened with this potential deal?  You mentioned you had scheduled an appointment to see it a few days ago?

- Tom

Francisco J Delgado · Answer

Woops, just noticed I pout the property is 2 bed 1.5 bath, its actually a 3 bed 1.5 bath which is what made me more confident about the ARV

Dmitri L. · Answer

Given the sqft, may be borderline, but would be interesting to see if a 3/2 conversion is possible? That would increase your rehab a little, but potentially the ARV alot.

Good luck negotiating! Just don't try to force it if the deal isn't there

Brent Coombs · Answer

@Francisco J Delgado Have you also analysed who YOUR Buyer is going to be? ie. will you be able to easily find your Buyer, OR, fund your Buy? Cheers...

Crystal Smith · Answer

@Francisco J Delgado We purchase property from wholesalers.  We also sell properties.  We're not buying in DFW @ this time but when we did we always passed on deals when we couldn't find enough comparables to support the ARV.  Bottom line for us:  2 sold properties does not make for a good assessment of the ARV & your September ARV will soon be unuseable so there may only be one comp.  I'd do some more work trying to find some more comparables before meeting w/ the seller.

If the property is already occupied w/ a paying tenant then you may want to consider forgetting about the ARV and focus on the As Is Value.  Do you have enough comparables to support the As Is Value.  You should have that before you meet w/ the seller.  Also you're eventual end buyer may not care about the ARV & only care about current as is.

Jacob Michaels · Answer

@Francisco J Delgado I'm a Dallas wholesaler. It'd really depend on what those comps are exactly. The comps need to represent real renovated properties. Those numbers seem promising.

Also, if I were you I'd go in with the mindset of netting $10k off a property. Even if you don't get it you'll probably get more than $2k.

Feel free to PM me with more details and I'd be happy to give you a clearer perspective on it, and I can also help you move the property when you get it

Deal analysis on my first potential wholsale lead?

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