All Forum Posts by: Daniel Evans

@Moises R Cosme Thanks for the reply; it's definitely helpful. Yeah I was thinking the same thing - the costs are high relative to the purchase price. It sounds like I'll just need to get to a point where I feel confident inspecting it myself so I can remove those costs. 

So I'm about to write an offer for a prospective deal, and I'm pretty sure I've buffered enough renovation costs for the amount I'm offering. However, I'm concerned about the costs I may incur during the due diligience period. Consider the following scenario.

1. I offer 30k to purchase a property. I anticipate repair costs will be 20k, and I believe I can sell it for 75k.

2. The seller accepts the offer of 30k, and I order a home inspection that costs say $400 and a structural engineering inspection for $400 (I know that this property has an issue with the foundation).

3. The inspection comes back and mentions some serious issues with the house that I didn't see when I walked the property. I get bids for these repair costs, and they are estimated at an additional 10k

4. I take this to the seller and ask for 10k off the purchase price of the property, but the seller refuses an reduction in asking price. 

5. So I either have the choice of backing out of the deal and losing the costs I incurred during the due diligience period ($400 for home inspection in this case), or I can take the property as-is. If I take the property as-is, then I'll be dealing with very little profit potential. If I'm wrong about resale or additional repair costs come up, then I'll probably lose money.

So in terms of what to do in this scenario, you'd probably just back out of the contract. If this were to happen for on multiple properties though, then I'd start racking up a decent sum of losses (5 properties x $800 = $4000 in losses). 

So my question is how do you prevent this from happening? Do you do an inspection yourself and just make sure you are very confident that repair costs will come in as anticipated before making an offer? Is this just a cost of doing business, and as I gain more experience, this scenario will happen less often? 

Was wondering what kind of permit you needed to do the flip in Huntsville? Based on this post, you need a home builder's license, but I'm guessing that isn't the case? 
https://www.biggerpockets.com/forums/850/topics/832185-light-flip-in-huntsville-alabama

Adding to @Bill Plymouth, I'd estimate the ARV by finding comparable duplexes in that area which look pretty much exactly how this property will look after you fix it up. Your ARV would be somewhere around the price at which your comparables sold (assuming your comparables are good).

For estimating rent after rehab, try to find out what some comparable duplexes are renting for. Your realtor should also be able to help some with this. 

Once you have those numbers (and a couple others), I've found the biggerpockets calculators to be pretty helpful in estimating returns. I personally don't see much difference between analyzing a duplex and say a single family home.

@Ran L.

What data you are looking at?

Hi @John Craven, I just moved here about 2 weeks ago, and I'm thinking the same as you pretty much real estate wise (small multifamily) would love to meet up for a coffee at some point once your settled. Reach out any time!

@Aaron Anderson I’m also looking for renovation contacts. What work did they do for you? 

@Sean OToole Oh right, the bank will want to make sure it gets its money back so getting a discount when the seller doesn't have equity is going to be harder. That make sense now.

@Sean OToole When you say absentee and equity you are saying that the owner should have a decent amount of equity in the property? That is because people who do not have much equity have less of a reason to sell since they don't have much money tied up in the property right?

@Tom Rolph and @Cameron Tope Yeah that is what was expecting to hear. I meant that the idea behind house hacking in general is to live free while the tenants cover the expenses of the property. Based on some research (which admittedly I could do more of), it seems like finding a multifamily property that can achieve that is unlikely.

@Arlena Clausi I am open to most ideas except for deals that would require major rehab just because I don't have any experience there yet. But I'd like to grow this pretty quick so just trying to figure out the best place to start. 

@Sarah Ellis Thanks! I imagine I will :) 

@Jacob L White Probably the usual 20% or use an FHA loan