First Offer, the end of analysis paralysis

[Troy Parker]

Evening BiggerPockets community,

I have been sitting on a preapproval letter for a couple months, analyzing deals daily, waiting for the right deal. I finally found it yesterday. A bank owned 3/2 foreclosure in my neighborhood listed for 220k. The listing stated there was a brand-new roof, HVAC, and flooring. The kitchen and master bathroom need to be completely gutted and remodeled. I had a family friend who was a former contractor inspect the home and he found no issues with the foundation, electrical, or plumbing (I still plan to get a subsequent inspection). The walls have mild discoloration which I plan to wash and then subsequently paint by myself. I plan to replace the doors and windows to make the home more energy efficient.

The property was listed yesterday, and I promptly drove at night to inspect the property (thanks for the tip Barbara). I called off work and I looked at the property again in the morning and contacted the listing agent to see if there were any pending offers. The listing agent indicated that there were no offers, and it was in the "First Look" period until 1/6/24. The listing agent said they would present all offers to the bank on Friday. I subsequently sent an offer for $222,000.00 with a preapproval letter that would expire on Thursday because I could also send a follow up offer on Friday. I went slightly above listing because my research showed that there was not much negotiation room in foreclosures and the bank had put in around $196,000 in expenses and fees.

The properties across the street and adjacent to me are worth about 290-310k (I picked the worst house in a good neighborhood). I am estimating that repairs and renovations will cost between 45-60k and expect the home to be worth 295k after forced appreciation. I plan to put 5% down, pay for the renovations, reappraise, and hopefully eliminate pmi. I am also a licensed realtor and saw the buyer's agent receives 2.5% in compensation and 20% of that 2.5% goes to the broker. I expect to get $4,444 in compensation, which I plan to put towards my 5% downpayment and supplement the remainder with cash.

I plan to live in the home for two years and make renovations while I live there. Year three I plan to purchase another live in fix and hold rental with a 5% down payment and using my buyer's agent commission towards that down payment. Rinse repeat.

If my offer is accepted, I plan to take pictures of the home and show my progress on my BiggerPockets profile. This is the beginning of my real estate investor journey.

What do you think of my plan? What should I be looking out for?

[Jonah Hartsburg]

Thanks for sharing, Troy! This is exciting, and I do hope to hear how it works out. 

Similarly, I started investing while I was getting my license and have been extremely grateful to have it while growing my portfolio. The last time we moved primary residences, we were able to work in a bonus house plus commission, all while keeping the former residence as a long-term rental! 

Just from the details provided, the only thing I'd suggest is to keep closing costs in mind, both on the front acquisition and eventually the refinance. If the rental rate is sufficient, that's only if you want it to be an ideal BRRR with $0 cash left in the deal. What is the estimated rental value when the renovations are done?