All Forum Posts by: Andrew Lax

 I think you are closer to a decent offer than @Joe Villeneuve.  While I consider him Very knowledgeable, we have very different investment philosophies but both seem to have done well with our investment philosophy. 

>Investor would get a discount on ARV and be cash flow positive during the holding period.

My issue is the premise this is a discount purchase.   I do not do a rehab unless it projects a value add of at least double the projected cost of the value add.  This is because they have risk and take work.  Your price barely meets this minimum criteria, so it is not a discount.  In addition I have yet to encounter a seller cost of value add being as high as my conservative cost Projection for the value add. Maybe if everything went perfect, but that never happens.  

Assuming the buyer can qualify for conventional financing and your numbers are accurate (which I suspect if I was purchasing my value add cost would be higher)  

They purchase at $400k. They spend $50k on rehab in 2 months. They refi with conventional f/f (~7%) at value of $500k at 80% LTV. They pay back the loan.

Issues the numbers are too tight.  The property will be negative cash flow as a rental. 

Now as flip, numbers are too tight and selling and holding costs deplete the $50k added value. 

I will say most properties are currently not working as an investment property but with your value add being needed this is being offered as an investment purchase.  It will not meet any halfway decent investors expected return.  

This does not imply that you are not on a workable offer, but you are not that close as proposed. 

If you think I am wrong, do the rehab yourself and sell post rehab.   The reason you do not is that the numbers do not justify the effort.  

Good luck

2 - What's an "inferior pocket"?
3 - Having no debt opens the door for some real interesting creative seller financing.  What you described as an option isn't a good option (I said that nicer than what I wanted to say).

First, dump the idea of Hard Money.  You're not a hard money lender (unless you are actually/legally one, then if you are I appologize).  Even if you were, why would someone take these terms?  What happens to the deal for the buyer after 3 years and the interest and the loans to you have to be paid?  The answer is a property that loses money big time, and they won't be able to get out of it.

What's the rent. taxes and insurance?

What makes this a "less than desirable" property?

Do you still owe anything on the property?