Need Help with Deal Analysis

[Dala Daniels]

Hello

I am working with a Realtor and she sent me a property that is being listed for 198K and the return value is $350K there is about 50K in rehab. Would this be a decent investment? I am looking to work wholesale, lease option and turn key deals, would this be suitable for one of the 3? Nonetheless is there any meat on this bone? Thank you :)

[Brian Burke]

@Dala Daniels a $350,000 house needing $50,000 in rehab is a great deal at $198,000. The quality of the deal deteriorates if the first two numbers are wrong. Two of the most common errors made by new investors are overestimating the resale value and underestimating the rehab cost. It's a very common mistake and happens because of lack of experience or having so much enthusiasm to get a deal that you flex the numbers so you can pay more.  Don't let that happen to you. Get more than one opinion of the value and look at the comps yourself. Remember--you will be the one taking the risk, not the agent.  Experts are no longer acceptable experts when they are trying to sell you something. 

Get estimates from contractors to confirm the rehab cost. Then add a contingency.  No flip goes exactly according to plan, you'll find extra things along the way that'll cost you.

Finally, if the ARV and rehab are correct, I suspect that the listing is underpriced in an effort to create an auction-like environment with multiple offers bidding the price up. Be prepared for that possibility and if it's happening don't get caught up in the frenzy and make that mistake of squeezing the numbers so you can bid too high and turn a winner into a loser.