Analyzing potential first deal in upstate NY

[Dustin Clark]

Hi fellow BP’ers-

My name is Dustin Clark.I'm a prospective REI investor in Watertown, NY – the "real" upstate.I've spent the past few months quietly behind the scenes soaking in as much real estate information as possible including BP podcasts, forums, webcasts, all the free books from BP, reading other books (Rich Dad J), webcasts, etc.I've spoken to a few local investors about their strategies and after much discussion, my wife and I have settled in on BRRRR with the stipulation of our all-in costs being less than 80% of ARV.We are using a HELOC for up-front cash to get the deals and work done and would refi once the improvements are done and we're at our full ARV.

After looking at several MLS listings using my own spreadsheets, digging in several layers on a vacant house just down the road only to come to a dead-end (bankruptcy, divorce and foreclosure… eek), we are taking another step towards getting our first one under our belt which brings me to my question(s).

I’ve been drawn to an 1880 duplex in Watertown that has a new roof, newer windows, newer siding and that’s about it.The house is a 6 bed 2 bath (3/1 each side) with a good overall layout (coming from someone with no experience…).The problem lies in the inside.The furnace and hot water heater are newer which is great but it needs a complete gut of the kitchen and bathrooms and the plaster walls and ceiling are in very rough shape.The plaster is my primary concern and turns out is the largest item in the rehab costs.

I “unfortunately” have the ability to do all the repairs myself but I do not have the time as I am a full time + civil engineer.My experiences in and out of work do give me a great handle on what needs to be done and a pretty good idea on costs.As I mention however, this plaster issue is one that I have not dealt with.I’ve tore-off and re-sheetrocked but never repaired or sheetrocked over.I think the best solution is to drywall over the walls with ¼” drywall, and tear-off the ceilings and drywall.Here’s the deal in a nutshell:

Current asking price - $35,000

Repairs (not including plaster) - $37,000

Plaster repairs - $15,000

Misc/contingency - $5,000

Total rehab cost - $57,000

Potential rent - $800 * 2 = $1600

Estimated ARV - $80k - $85k

With our strategy, we would need to be in to this at no more than $64k making the purchase price $8k.With the current asking price, this seems crazy to me…A few pics below show the kitchen and dining room.The dining room pic makes the plaster look much better than it actually is.

I’d love to hear from you guys on our approach, the deal overall, the plaster repairs/fix, etc.

Thanks in advance!

[Brianne Chard]

@Dustin Clark that can be a huge expense and something a lot of people don't think about, so good thing that it's decent. 

I'd say throw in the offer at $8K, the worst they can say is no. My advice, since this is your first - don't get emotionally involved in this property. When you get emotionally involved, you tend to not hold firm on your numbers. It sounds like you've run these numbers back and forth and every which way, you know where the deal will work for you and where it won't. Don't let the fear of losing this deal result in you overpaying for the property. I said this to one of my clients a while ago and apparently he'd never looked at it that way before. This isn't your forever home that you've fallen in love with and can see your kids growing up in. This is business, plain and simple. There will always be another deal.