1st Potential Deal. Could This be a Good One?

Question

Hello BP. I am brand new and have not done a deal yet. The extent of my experience is buying my primary residence which i sold back in August. I had a colleague offer me and my partner a deal in a very rural town, Janesville Ca. I was looking for a little help with this. I am hoping for some experienced eyes to look at the property and let me know what they think. It looks like a big job.

Here is what I know:

It has a septic system (condition unknown)

It needs a new pump for the well

It needs a complete electrical and plumbing system (I am an electrician so I can do that)

I assume a new heating and air system

If you look at the link seams like a total gut on the inside

It is currently 4+ hours from where I live. I would put up most of the money and my partner would handle a lot of the management. I would help of course. I have a construction background and would do some of the work myself but not a lot. I think we could get this property for 20-30K. Any tips about where to start would be great. I will look into finding an agent in the area to get some realistic comps but what else should I look at. How much rehab do you think it will take? Also If anyone has made a purchase in this area I'd love to hear about it and if you have any suggestions for agents or contractors. Here is the Zillow Link:

https://www.zillow.com/homedetails/463-675-Main-St...

You're thoughts and experience are greatly appreciated.

Thank you.

Erik Harrison · Answer

hey @A Vaughan no I did not buy this property. It turned out to need much more work than it was worth. We passed. I continue to educate and search for deals.

A Vaughan · Answer

@Erik Harrison Did you end up buying the property?

Erik Harrison · Answer

Thank you @John Leavelle

John Leavelle · Answer

@Erik Harrison

I do a lot of research on an area/neighborhood before I start seriously looking for properties.  There are a number of websites you can use to conduct your research.  Here is a list:

City-data.com

padmapper.com

Areavibes.com

Crime reports.com

ESRI

Zipwho.com

Rentometer.com

Realtor.com

Redfin.com

Zillow.com

Trulia.com

Apartments.com

Rent.com

Homfinder.com

This list is by no means complete.  I have not used all of them yet.  And as I said before your Realtor and Property Manager are excellent sources.

I want to know what class of neighborhoods are there, Property types, average sell prices, crime, schools, economic growth,  rent rates, etc., etc.  In other words as much as I can.  I then drive the streets to get a personal feel for the area.  This may not always be possible.  So I’ll use Google Maps Street View to run up and down streets.  That’s what I did with Your property.  Since I’m primary interested in small multi family properties (2 - 4 units) I try to identify every one in my target area. Who owns it, all the pertinent details of the property, what the rents are, what price it was purchased for,  and so on.

Once I start looking at properties I want them to meet certain minimum criteria.  I want distressed properties.  If a property gets listed for sale then I already have a jump on the analysis.

This may be a tedious process for sone investors.  But,  that’s the way I like to do it.

Erik Harrison · Answer

@Jared Lillard where are you finding your deals to analyze?

Erik Harrison · Answer

@John Leavelle that is great insight. I️ did connect with a broker yesterday who also does some stuff in Reno, Nv. She’s going to look for some potential deals in that area for me as well.  When you are looking for a deal where do you start with analyzing? I️ need a checklist or something to know where to look. You mentioned rentometer. What else do you look at? Schools, crime, vacancy, unemployment? Where do you look at all those data points?

Erik Harrison · Answer

@Brent Coombs 😂 your are probably right. I️ appreciate the breakdown I️ hadn’t thought of it that way but, it made me laugh to realize the dwelling is bringing down the value. Thanks for looking into it for me.

Jared Lillard · Answer

@Erik Harrison My first and only deal to this point was a flip I bought in the summer of 2007.....at the top of the market.  I still live in it.  I haven't done any since then.  I'm just now getting back in the game and am pouring over potential deals every day.

John Leavelle · Answer

@Erik Harrison

I live and invest in rural area's outside of San Antonio.  I use the BRRRR strategy primarily.   The main thing you need to nail down is what the Market is for that area.  Not only sales, but, what is the rental demand?  I did not find many rentals when I searched Rentometer.  Not saying it will not turn out to be a deal.  Just do thorough research.  Try to find a Property Manager that knows the area and get their opinion.  It is a small lot.   A lot of landscaping needed.  It is still not looking good to me.

Brent Coombs · Answer

@Erik Harrison, from what I can see being sold around that area, land is worth about $20k per acre, right? (And there doesn't seem to be any shortage of it, either).

This one, being 1/4 acre, should be worth about $5k, right?

And the "dwelling" on it is a joke. ie. Is arguably lessening its land value!

My conclusion: It's net value is currently less than zero! (And I reckon the Seller believes it too!)