All Forum Posts by: Luke Woodruff

Thanks again to all who responded to this thread. My brother and I decided to NOT go forward with this deal given the small cu de sac, difficulty of getting an accurate value on it and some repairs that needed to be done.

I will say that one of the two listings at the front of the street sold for approximately $180k (haven't seen the exact number on the assessor site yet). That house was recently renovated and nicer than the one we were looking it but it does give a basis for the house we were considering. I would estimate ours is probably worth around $150-160k or so based on this sale. That said we didn't go for it.

Thanks @Rick Baggenstoss. Seems like one to stay away from.

That said $80-90k seems very low. It sold for $95k at the end of 2013 before this guy renovated the property. Also, the other two for sale are similar but more recently renovated and for sale at  approx. $195k which was just reduced. I wish they would sell to give me a better indication of value but I doubt they go all the way down to $100k or so.

I guess my plan was to break even for a few years and assume the gentrification will continue down Memorial. As a local expert, do you see that happening?

@Rick Baggenstoss Great guess and yes, it's a rather "unique" small street. It's north of Memorial which is nice but isolated. There are currently those 2 houses on the market there and it looks like both just were reduced in price. Sounds like a street to avoid...

@Kevin Polite It's a 3 bed, 2 bath of 1,192 SF that was renovated in 2013 with a new kitchen and baths. It's off Woodfern Drive and there are currently two houses on the market on the same street which have both just been reduced to $190k and $189k probably because they were put on the market in the middle of winter. This home is pretty similar to those.

Thanks @Anna Watkins It's on the north side of Memorial Drive off a small road there, east of East Lake and southwest of Belvedere Park. It's a Decatur address but I'm not sure if it qualifies as CoD or CoA. Zillow shows schools in Belvedere Park.

Thanks for your input. To clarify it's south of downtown Decatur not downtown Atlanta. It's adjacent to East Lake which is gentrifying rapidly as is Decatur. 

I guess I don't see the risk as you put it. I'm only putting down $5-10k and could sell it next spring for $40-50k profit if so inclined. Plus the mortgage isn't much and we could easily afford it even without a tenant. So yes, it would be speculating that the coming gentrification continues and pushes the value higher but I would have gains as soon as I purchased it.

Thanks for the reply. I agree the returns are low which has me a little concerned.

There is not much risk that we couldn't refinance immediately. The appraisal is done through the AMC but it would go to the same appraisal firm who did the last 2 the past several months. Even if they were 10% lower this time (unlikely), it would still be enough equity for a conventional loan.

I'm basically buying into 50-60k of equity for 5-10k, then breaking even for a few years to sell for what could/should be a lot more. At least that's how I'm looking at it.

The property is at the end of a small street with 12 or so houses on it. 3 have been recently renovated, 2 others are currently being renovated. This property was renovated in 2013 as well.

Hi Bigger Pockets community! This is my first post but wanted to get some feedback on a deal my brother and I are working on in Atlanta.

My brother is a mortgage broker for a firm in town and we have an opportunity to buy a pre-foreclosure property from another, unrelated fund within his firm. I am a commercial eal estate appraiser who works on medical properties (hospitals, medical office buildings, etc.) I do not appraise residential properties so no conflicts of interest there.

The house is located in Decatur but not in the best part of Decatur (south of downtown). Here are the details:

Purchase Price: $139,000. The property has been appraised twice in the past 2 months for the firm at $200k and $195k.

The plan is I would purchase the property with $5k down in a higher interest bridge loan. We would then get a new appraisal and refinance to a conventional loan with the acquired equity.

Monthly rental rate: $1,400

Using expenses of 8% vacancy (1 month), 10% of EGI (management fee), 2% of EGI (reserves), $100/month (repairs), insurance of $732/yr (quote from state farm) and real estate taxes of $3,440/year (just tripled this year but can't challenge until next year)

This results in a NOI of $8,229 and a cap rate of 5.92%.

Mortgage at 4.5% would be a month payment of $678/month ($8,147/year) which leaves a small cash on cash return of 1.64%.

The numbers aren't great but I do believe this will be a high appreciation area in the next few years as more and more people move back closer to downtown in Atlanta. Our plan is to hold the property for 4 years and sell if the time is right. I feel inclined to do the deal as long as it can cover it's costs, which it barely does currently. However, we can appeal the tax assessment next year and have a good chance of getting those lowered which would help the numbers greatly. We have also considered adding a deck on the back as it overlooks the creek which would help with resale and may help getting a higher rent.

Any thoughts or questions? Anything I am missing? Thanks!