Help Us With Our First Deal Analysis

[Tony K.]

We've found a 4500 square foot house that is for sale for $450,000, says it's valued at $750,000, and only needs minor repairs such as fresh paint, landscaping, and new appliances. The home was built in 2006. It's located in a very nice neighborhood, near a lake.

This sounds like an obvious money-maker. How do we actually analyze this?

[Jon Holdman]

If the owner is saying its worth $750K rest assured you will never sell it for more. Realistically, its not worth anything close to that or the owner wouldn't be offering to take $450K. The owner may mean "once upon a time at the height of the bubble I though it might be worth $750K." He sees a newbie investor and sees a way out.

There's an extra strike against an expensive property like this. That is that it takes a non-conforming loan to buy an expensive property. That means a high down payment and a high interest rate.

What would be your plan for this? Wholesale it? Are your buyers up for a property this expensive? You already understand a rental in this price range (whether $450K or $750K) is insane.

Move on. There's no deal here.