Help Analyzing a deal

[Janesly Lafortune]

Hello, BP family! I am new to posting on this forum however I've had the opportunity to read a lot of useful advice on here. I figured I give it a try for some sound advice. 

I am looking at my first deal, naturally, I'm excited but I don't want that to fog up the logic in the numbers. What I would like to know is if this is a smart buy? What would you do in this scenario? should I buy and hold this home (BRRR) or flip and sell?

Breakdown of the deal:

This is for a Single-family home  3 bedroom 1 bath 836 sf living area. I am  looking to convert to a 2 bedroom 2 bath.

purchased price: 47,900

Rehab cost: 38,000 estimated I personally believe 50k 

Arv: 145,000

I pulled three comps in a mile radius of it.

comp 1:  2/1 940 sf 0.7 miles away sold on 05/13/20 150,00

comp 2: 2/1 964 sf 0.6 miles away sold on 3/12/20 162,000

comp 3:  1/1 876 sf 0.9 miles away sold 3/20/20 149,000 

I am curious to know for a first project is this a smart buy or should I continue to search?  I thank you for your advice in advance.  

[Joe Hammel]

Welcome @Janesly Lafortune

If those numbers are accurate (rehab, ARV) that's a pretty sweet deal. What are some rent comps? If your ARV is $145K then as a general rule, (the 1% rule) you would want it to at least rent for $1450 after you fix it up. This would most likely make it a great BRRRR. BRRRR is hard to go wrong, because even if you break even on cash flow, your ROI is so high because you have none of your own money left in the deal after the refi. However, if you're looking for cash flow, and it doesn't meet the 1% rule after you Refi, it might make a better flip. Then reinvest the gains into something that beats the 1% rule after the rehab.

- Curious, why a 2/2? Seems as if a 3/1 would have a higher ARV... Is there a basement to add a .5 bath and keep 3 bedrooms.

- The deal will live and die by your rehab estimate and accurate ARV. This deal actually seems killer. So maybe it needs more work? Or maybe the ARV isn't quite so high? Or maybe you better buy that asap, lol.

- Be cautious of Wholesale "estimates" Wholesalers are bound by no ethical standards other than their own, and obviously want to make the numbers look great.