My non-competitive offer...

[Wesley L.]

Please excuse the sarcasm in my title. I've been working with a realtor for the past couple of months and it's kinda ridiculous of late. Listed properties seem to be selling for +10% above asking and from my view, putting them in the spec arena. For me, the numbers need to make sense so I'm sticking with my non-competitive offers.

Please critique my latest offer and let me know what I can do be more competitive but still make the numbers work.

2/1 SFR, 900sqft, 0.25ac lot, listed for $110K.
It's a complete gut rehab and actually 200 sqft of it looks like unpermitted work with foundation issues.

Comparable 2/1s are selling for 200-225k, 3/2s, ~1200sqft are selling for 275-325k. The comps are run by my realtor so I'm assuming correct.

Rents for 2/1 are $1200/mo, for 3/2 are 1700/mo. Source rentometer.com.

Plan: Rental Rehab 2/1
40k for the rehab and bring the property to code. From my SS, here's what the offer price looks like for self-managed, refinance with conventional loan after rehab 30yr @ 4%:
NOI $8,640
Desired Cash Flow $100
Max Payment $8,540
Max Loan Amount $147,673.96
Max Offer Price $106,023.96

Plan: Rehab and add to 3/2 1300 sqft to Flip
40k + $100(400) expansion = 80k rehab
Quick formula 0.7*300000-80000= $130000 offer price
At 80%*300000-80000 = $160000

It's listed for $110k, I offered $121000, all cash. For a rental, I would refinance with a 80-70% LTV to make the numbers work. For me, I'd rather do a 3 month rental rehab versus a 6 month flip.

I expect the place to sell for around $160000-$175000. The last couple of places sold for around the 80%arv-rehab +/- $20000.

A couple questions:
- Am I way off and what numbers should be corrected?
- What would the pros offer on this type of place?
- What would you offer to stay competitive and make the numbers work?
- Would you knowingly submit a "non-competitive" offer as just in case to play the numbers game?

Thank you for your advice.

Wesley

In it for the long run, learning and loving the journey!