Can you review these numbers?

Question

Can you review these numbers and see if I am forgetting something or over calculating something?  Credit to Brandon as I believe I got my framework from his site.  Thanks.

Purchase Price (B23)	                                                   $100,000.00
Repairs (B24)	                                                                   $50,000.00
Points Charged by Lender	                                           3.00%
Points Added to Loan	                                                   $3,000.00
Purchase Closing Costs (@ 2.5%)	                                   $2,500.00
Out of Pocket (includes closing costs and payment)           $7,750.00
Holding Costs (Taxes/Insur/Util/HOA/Lawn @ 2.5%)	   $2,500.00
Inspection/Appriasal Fees	                                           $600.00
	
Total Invested	                                                                   $165,750.03
Total Cash Needed From Lender	                                   $153,000.00
Hard Money Monthly Payments (16%)	                           $2,031.84
Total HML Payments (@ 6 months)	                                   $12,191.04
Lender Loan to ARV	                                                           67%
Total Loan Owed Lender	                                                   $165,191.04
	
After Repair Value (B25)	                                                   $230,000.00
Home Warrant	                                                                   $450.00 
Termite Letter	                                                                   $100.00
Realtor Fees (@ 6%)	                                                   $13,800.00
Our Closing Costs	                                                           $1,500.00
Their Closing Costs	                                                           $1,500.00
Total Debits at Closing	                                                   $16,800.00
	
Total Cash Received if Sold Now	                                   $213,200.00
Total Invested (B41+B49)	                                           $177,941.07
	
Total Profit	                                                                   $35,258.93

I have the rehab costs at $42,500 however I increased the allowance to $50,000 to cover any unexpected costs.  Also the recent comps are $240,000 (for a great renovation), $225,000 (for a pretty good rehab....nice kitchen, nice bathrooms, good curb appeal, standard everything else), $190,000 (for average rehab.....basic, cut on finishing materials, etc.).  I think the agent will come back with best and final and I will resubmit for $105,000.

Jon Holdman · Answer

Buy plus rehab ($150 total) is 65% of ARV.  That's a SCREAMING deal.  You confident about your numbers?  Especially the ARV?  You're looking at ALL the available comps, and using the ones at the lower end,  right?

Your HML is allowing your to defer payments until sale?  That's unusual.

Closing costs on the same look low to me.  Be sure to do a hold open on the purchase, which will reduce your title insurance costs when you sell.

I didn't go through the math item by item, but the calculations look about right to me.

Derek T. · Answer

Two of the above comps are from the same street and the other is from a street over in the same developmemt.  They are all split level houses.

There are 3 more renovated comps that are raised ramblers within .4 miles of the house (one on the same street) and that were sold in the early to late summer.  These were good rehabs and sold for mid $220,000s with the other selling for $190,000.  The $190,000 was more of an update then a renovation (done by homeowner).  There are more comps but those are the only renovated comps in the area.

Derek T. · Answer

No the HML is due every month.  I just calculated the total payments with an estimation of having the property for 6 months.  But no you are correct, it is due every month and I just added it up to get a general idea of the total payment amount.

For comps, I used $230,000 as the ARV for the comps.  One sold at $195,000 (very basic rehab), the other is listed for $229,900 and is an average rehab and the other was sold at $249,000 which was immaculate.

The subject property was built in 1971, has 1984 sq ft, has 5 bd/2ba, has a 10,454 lot size and has no garages.  Here are the comps I pulled.....

Comp-      Comp 1....................Comp 2................................Comp 3
Addr-        Address...................Address...............................Address
Price-       $249,900................$195,000.............................$229,900 
Pr Sq Ft-  $116........................$139...................................$102 
Sold Dt-   10/5/2012...............5/31/2012...........................Active
Beds-       5..............................5..........................................5
Ba-          2.5...........................3..........................................2
Ba Adj-    -$5,627...................-$11,253..............................$0
Sq Ft-      2,160.......................1400...................................2,256
Sqft Adj-  -$6,396...................$21221...............................-$9,884
Lot Sz-     12,632.....................12,632.................................10,454
Lot Adj-    -$13........................-$13.......................................$0
Garage-    0..............................0...........................................0
Gar Adj-   $0............................$0.........................................$0
Cond-  excellent..................above avg............................above avg
Yr Built-   1966........................1971.....................................1969
Price Adj-$237,865...............$204,955............................$220,016

Avg Price..........$222,450
Avg $/sqft........$127
Avg Adj Price....$221,410
Adj $/sqft..........$124

I am concerned about comp #2 because it is the same exact house however the sq ft is almost 500 lower so I think that is a mistake.  I used $230,000 as the ARV, do you think I should have been lower (maybe $215,000-$220,000).  I put in $230,000 because the the 2 lower comps didn't do a master bed conversion while the 1st one did.  There is no true master bedroom in the house so I would do a conversion as well which is why I increased ARV to $230,000.  What do you think?

Jon Holdman · Answer

Are there more potential comps?  You need to look at ALL possible comps because you have no idea which ones an appraiser will choose.

J Scott · Answer

First, you can throw out Comp 3, as that's not a comp (not until it's sold).  If anything, you can only say that Comp 3 is not worth $230K, as it hasn't gotten an offer at that price.

Comp 1 is larger than yours (200 sf) and has an extra half bath.  From an appraisal standpoint, that could be worth $5-10K, but from a sales standpoint, it could be worth much more.  You'd need more data to determine the actual effect of -200 sf and -1 half bath.

Comp 2 is several months old and the square footage doesn't easily reconcile with the number of beds/baths.  I wonder if there is a mistake there, or if there is extra square footage below grade that's not counted (but the beds/baths below grade are).

Ultimately, there isn't enough information here to determine a true resale price or a realistic appraised value.  If it were my data and it were all I had, I would assume that resale is somewhere between $200-225K and appraised value is between $190-230K.

That's a large range, so you're going to need to find more sold comps to narrow it down...

Can you review these numbers?

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