Should I give up on this deal? Nashville

Question

Hello! I'm new. Closed on 2 deals this year one SFR and one vacation rental. Both of them are crushing it as far as I'm concerned but after spending too much time on these forums and going to REIA meetings I'm beginning to think I'm not shooting high enough.

Are the people at the REIA that want a minimum of 1.5% self managing or are they using a landlord that they have to pay? I'm self managing (i'm literally mowing lawns) at 1.3% and I am more than happy with it. Am I settling?

Madison, TN I found a deal on a jog last week. It's a 3/2 C+ B-  Needs an HVAC washer dryer and flooring (carpet in two bedrooms minimum for now). Needs a coat of interior pain and some siding fixed in the back. Will also need wheelchair ramp removed and a deck put on. To get it 100% and rent for a premium I'm guessing $10,000 with me doing the painting and most of the interior rehabing. Basically 5k for HVAC 4k for Deck 1k for CL washer dryer and pay some buddies of mine to help me rip out carpet and tear off the wheelchair ramp and paint. I love to sweat.

Owner is asking 135k

I think it could rent for 1450-1500 (I own a house on the same street from the same builder that rents for 1450 and I plan to raise it to 1550 although that one is a 3/3).

It's been sitting there for a month. The Son of the owner is staying in it as she recently went to an old folks home. The son has no interest so I asked him many questions. He said his mom is ready to sell right now and he wants to move back to Atlanta tomorrow.

From what I'm gathering, to get someone to go 50/50 with me (oh yeah did I mention I'm out of cash?) I'd  need to get this thing for something like 90,000, put in the 10k and rent it for 1500. Is that about right?

Is anyone going to accept an offer 45,000 under asking price? I can't turn on the TV without seeing a house flipping show that takes place in Nashville. I am glad to see things have slowed down tremendously in the past 3 months especially on the east side. But have they slowed down 45,000 worth?

What would make this a decent deal and how can I find a partner? Is hard money a terrible idea? Should I bother making an offer of 90k?

Please show me the ways oh wise ones!

Roger Poulin · Answer

Before you meet with him, know the comps on recent sales and rents. Go into the negotiation informed.

The first trick is to help them deal with their pain, and to try to get them to negotiate with themselves with phrases like, "I see it has been sitting for 3 months, how will you be affected if it sits for another 3 months?", (wait) "6 months?" (silence is your friend here)  Then ask them if you could,  "What would you be willing the sell it for if I take that stress and worry away, by closing on the day of your choice?"

You need to set your walk away number, not people you don't know on a forum.If they have decent financing in place, you may want to go a little higher with a "subject to" offer.

Based on the numbers you provided you should be shooting for the 90k mark, but it may be rejected. Oh well, move on to the next one. I prefer to not give any number, just let them talk themselves down like the example above.

If you need help covering the down payment, reach out to me on a PM.

Luke Carl · Answer

I do expect appreciation of 1000+ per month.

Is it worth it to try and make an offer on this thing? Do I make it contingent on my "partner" and 60 day close to give myself some time to find a partner? I'd have to offer something like 95 grand to find a partner that would be interested correct?

Amit Kal · Answer

Unless you think this one has great appreciation potential in the next couple of years, it doesn't seem like a winning deal at $135k.

At $90k + $20k in renovations, the numbers make more sense.

Perhaps this is one you can put under contract for a good price and wholesale to an investor like me. =)

Devan Mcclish · Answer

@Lucas Carl what a deal is to you might not be a deal for other investors. Also, investors are a little more conservative when it comes to partnering on rentals. All kinds of issues can arise over the time period of owning rentals with partners like do you dispurse cash flow, who holds the cash flow, who takes care of the day to day, and if one partner wants to sell what happens. Partnering on rentals is like a marriage and most people just like to date other investors, not marry them. I personally won't partner with anyone on rentals unless I have done other deals with them in the past and we have the exact same mindset and goals.

To your numbers, I don't think the deal you mentioned above is a good deal. 1%-1.3% is a pretty average deal in nashville. I can find those on the mls all day so why would I want to buy yours so badly. I am not saying there isn't someone who wants to buy that stuff or partner on it, you just have to look harder to find those people. Most of my buyers that I wholesale rentals to want one of two things

1. 1% rental in the path of immediate progress. Basically, is the development going to reach that area within the next 2 years at full scale

2. 1.5% rental or better for cash flow reasons

Also, your rehab numbers seem low. Yes, you are doing the work, however, you ALWAYS have to value rehab as if you're not doing the work or managing the property. I would probably add 5-10k more for repairs, suddenly that deal doesn't look very good.

and yes I agree, 90k seems like a much better price, I would even want to go a little lower.

But every investor is different. For example,

my basic rental criteria is this

1. $300 net cash flow per door

2. All of my money back on a refinance (so I need to be all in at 70% of the market value)

My criteria might be different than @Luka Milicevic or @joshbraun.

Should I give up on this deal? Nashville

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