Does this deal sound fishy?

Question

Hello All,

Wanted to get some input on a deal that was passed my way at REIA meeting last night.....

I am running the numbers and things are just not making since, so wanted to get some input from the masses, something just seems off or odd....

Orlando FL.,

B to B+ area

4/2/2

built 1973

1400sq ft

149k

est: 40k rehab

ARV $249k

rents in area on 3's going for $1800-2250, no 4 beds under 2500sq ft in area to compare rent rates

I asked the agent if it was sinkhole home, because numbers sound like one.. but claims not, states the home is currently owned and lived in by investor, investor bought home in 2001 for 90k at auction, has lived in it since and never put any money into the home except kitchen with new appliances. Roof is possibly the original, a/c is dated from late 90's but works, and most of the house has bare concrete floors, owner pulled all old flooring and trim up to install flooring, did only the kitchen and never finished the rest of the house. The back of the home is completely overgrown, the owner installed above ground pool years ago, but yard is so overgrown you can only see the ladder of the pool from the back porch.

I plan on taking the 3ish hour drive out to the property tomorrow, but wanted to get some input on things, maybe yall can think of some reason the house is priced so low.

Brian Pulaski · Answer

Who gave you the numbers? If it is the owner or a wholesaler, I would do my own DD. The rehab numbers are probably underestimated and the ARV probably overestimated. I would schedule to see it and run your own numbers.

Jay Hinrichs · Answer

not every one can live were nice houses sell for 25k and rent for 900  :) you lucky dog !!!

Ned Carey · Answer

I have no idea if this is a good deal or not. If you are questioning it because it seems to good to be true,, that is not an issue. That is a very average deal im my opinion. It may be a pretty good deal for that area but I do much better deals all the time.

It seems you are prepared to do your due dillegence. Do it and if all checks out move foreward. If you are still not sure it could be you don't know your market well enough. People who know there market well know a good or a bad deal when they see it. You learn your market by going out andlooking at lots of properties.

Chad McMahan · Answer

William- I would recommend you meet with a local remodel contractor, who is comfortable with roofing, plumbing and electrical, as well as the run of the mill remodels. Have him give you his 2 cents. If it checks out, get it into contract and pay for a home inspection (and any other needed inspections) for good measure.

There are more investor buyers than ever before, so the lowest hanging fruit needs work/renovation. But you have to check properties out and put in some time and usually some money (for inspections) to properly dig in and know a property.

My best advice- when you start relationships with realtors, lenders, title companies, etc- It's important to listen- but not give them so much trust that you take a back seat in the transaction. Be involved, take notes, ask lots of questions and LISTEN.

Good luck!

Blair Poelman · Answer

Fishy part is the guy bought at 90k and has been there since 2001, and all he has to put in is 40k to hit a value of 250k?  He would be all-in about 130k, right?

So why sell at 149k and walk away with only 59k when he could just finish the job and walk away with 120k?

Not saying the deal is bad, maybe the guy doesn't want to, or can't finish the project (sometimes these are the best deals).  Sounds like you need to learn what the seller's situation is in order to understand the deal completely.

Jay Hinrichs · Answer

I bet it close I have seen some of that rural PA stuff flush out about like that..   without Morris giving anyone a freedom number.. what a master of manipulation …. sell the dream sell the freedom  sell the I don't work for anyone anymore and the money just rolls in with no work on my part LOL.

Peter M. · Answer

Seems like someone pricing it to sell because they don't want to do the work themselves. By those numbers it could be a good flip or a decent rental if you did less work to make it rent ready.

David Baier · Answer

@William Huston Is this from a wholesaler? Either way off market or on market you'll want to verify everything. Get as much info as you can up front and act quickly. If you get this under contract everything you will need to know will come up during inspection and the due diligence period. Seems like a really good opportunity if truly in a B to B+ area.

Lynnette E. · Answer

Maybe it not the house, but the neighbors.  If the backyard got that overgrown and the neighbors did not complain, maybe their yards and behaviors are worse.  Also, I'd make sure to cut the yard down before closing just to make sure the overgrowth is not covering up something.

Does this deal sound fishy?

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