Is this Deal or Not?

Question

Hello All,

I have a property I'm thinking about putting under contract at $145,000 so I can wholesale it for $155,000. The numbers don't work for a fix and flip but might work for a fix and hold. Here are the numbers.

Split level, 4 bed, 2.5 Bath, 1920 sqft, build 1967, huge 2 car garage (28'x28') 1 wood burning fireplace, in great neighborhood, market temp for Bethel Park, PA is very hot. My ARV estimate is $250,000, Geico estimated ARV at $286,500

$145,000 - Purchase price

$10,000 - Wholesale fee AKA (my profit)

$155,000 - Sale Price to a buy and hold Investor

$250,000 - Comparables

$2,000/mo - Estimated Rent (avg rent for 4 bed 2.5 bath homes are $1800 -$1900 unrenovated)

$352.23/mo - Property Taxes

$83.56/mo - Homeowners Insurance Quote Values house at $286500 ARV - Geico quoted me a price of $2929/yr - I thought that was excessively HIGH so I used a calculation I found to estimate home owners insurance ($286,500 (Geico estimated ARV) divided by 1000 times $3.50)

$ 0.00 - All Utilities paid by Renter and responsible for cutting grass & snow removal, No HOA

$100/mo - Vacancy

$100/mo - CapEx

$755.27/mo - Mortgage Payment 30yr fixed @ 4.17%

$1491.06 - Total Monthly expenses

$6107.28 - Total Annual Cash Flow

$31,000 - 20% down payment

$5,500 - Estimated Closing costs

$45,000 - Repair Costs (Kitchen including new stainless appliances and granite counter tops cabinets and floor, 2.5 bathrooms full remodel, refinish hardwood floors, roof (30yr asphalt dimensional shingles , new windows, Paint inside and out, new Electrical Service Box, Flooring in kitchen, bathrooms, family room in basement. new High Efficiency HVAC, Light Landscaping.

Cash on Cash Return 7.49%

So what do you think? a good deal or not?

Would you buy this property?

Jordan Abromovitz · Answer

I'd be nervous finding a person who is willing to live in Bethel Park and pay $2000 a month rent. To me if I can pay $2000 a month to rent in Bethel, I'd just buy a house.

Anthony Dooley · Answer

If the ARV is truly $250K, then you should have no problem selling it for $155K.  I don't suppose you would want to rehab it yourself?  You would make a slow quarter instead of a quick dime. Put it under contract with a few contingencies and or a later closing date in case you have trouble finding a buyer.

Keith Saunders · Answer

@James C. Makes sense, thanks for the advise.

@Jordan Abromovitz I agree $2000/mo seems like a lot, and the market is not huge but not everyone can get financing or wants to own a house but they have a good job with a good income. And would like to live in a 4 bedroom home instead of a 4 bedroom apt. In addition as you know Bethel Park is a nice area with a great school district. The option to lease would be another exit strategy. Or even a temporary home for professionals relocating to Pittsburgh who have a family. That's the lense I was looking at it through.

@Mark Gallagher Thanks and I will contact you shortly.

@Brent Coombs Thanks for the clarification on James C post. I thought $210K asis was way high for this property. The way I try to approach my numbers is I would rather be high on my repair numbers than low. I don't want to get a rep as a bad wholesaler because my repair numbers are a joke. Here was my math $250K ARV - 30% = $175K - $45K Repairs - $10K Assignment Fee =$120K Max purchase price.

Account Closed Wise advice thank you.

Account Closed · Answer

Don't over-analyze and hesitate.  Get it under contract and wholesale it.  Good luck!

Account Closed · Answer

I live in Bethel Park and would agree with @Jordan Abromovitz that I don't think there's a huge market in Bethel for people who can afford to pay $2000/month in rent plus utilities, but wouldn't just buy something.  Just because the numbers work doesn't mean there's market for it.  Hard to say without seeing it, but I would lean towards flip.

Keith Saunders · Answer

@Taf Reid if you read my posts you will see I am using sold comps and not the Geico Estimated value as the ARV.

Taf Reid · Answer

DO NOT USE ANY INSURANCE QUOTE AS AN ARV... In insurance you are insuring the cost to REBUILD in the event of a total loss, NOT MARKET VALUE... completely 2 different numbers. The cost to rebuild could be much higher or much lower than the market value of the property.

use the recently sold comps to determine your ARV.

Will Barnard · Answer

These numbers are no good for a rental and the fix and flip numbers are very tight at $200k all in and $250k exit.

If you flip it yourself, perhaps you can work out a sub2 or owner carried note, get family, friend, or business partner to fund the rehab and holding costs, and make a few bucks. Seems like a low risk flip deal assuming your ARV is not the "best case scenario"

Brent Coombs · Answer

@Keith Saunders, to me, this one DOES look like it would suit being bought by a (professional) Flipper. They come along, see it needs (retail) $45k of work - which THEY can get done for $20k of materials and admin, which means THEIR all-in cost is $175k, which meets their "70% Rule" ($250k x 70% = $175k which is THEIR all-in cost)!

(You asked @James C. "Are you suggesting I sell the property asis for $210k to an OO?", but the answer to that would be no. He was just inferring that an OO would only have $210k into it - after THEY paid for the rehab). Cheers...

James C. · Answer

Keith,

I'd list it low and watch it go... say 155 to 165K, since time is short.

If you think there will be electric issues trying to get it financed, then be prepared to offer to fix them, obviously with the cost to cure built in. Get your quotes up front, if possible so if the issues come back you are prepared, if they don't then no problem.

Let's say you want 163K for your numbers, and you know it's 2K to cure the electrical, then put it on for 165K (be careful don't go too high), and if the electrical comes back as bad... say, "Is that the only thing that is keeping you from buying the house? Yes, well then I'll fix it before closing". You've built it into the price... if it doesn't come back as needing to be fixed, you make an extra 2K.

Does this make sense?

Good Luck!

Jim

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