All Forum Posts by: Andy More

Thanks for the detailed answer Bill.

You may try to the pic. link again. It seemed to work for me.

Its not sagging at the eaves.
There is no attich space below the sagging portion either.

Your second paragraph describes it best as it is a cathedral ceiling. I'm going to have someone take a look at it and see if its bad enought to need repairing. Removing shingles, roof decking and then sister another rafter does sound like a pain.

Thanks

I looked at a duplex yesterday that I'm scheduled to buy next week. I mentioned this in another post. I did an inspection of the property on Friday.

There is a section of roof where the rafters appear to be sagging. Its not just sagging between rafters. I took a pic but the sagging it not as noticeable in the pic as it is in person.

flickr.com/photos/9192910@N05/5065380783/

The overhang portion of the roof on the gable end(right side of pic) is not sagging at all. I'm assuming that exterior wall on the right side is keeping the roof from sagging. But, just inside gable overhang is where the rafters are sagging. Sepecifically its sagging towards the lower 1/3 of the roof.

The ceiling below the sagging portion is a vaulted ceiling. There are no cracks or anything in the ceiling or the wall that the rafters rest on. The exterior wall(brick portion in pic) does not seem like there has be any movement.

How common is a section of sagging rafters and is it something I should be conerned about? The property is about 15 years old. I believe the rafters are 2x6 and 24 inches on center. Not sure of the thickness of the roof sheathing

Property officially went under contract today for 145k. I found out after we agreed on the price that the property just had a new roof put on 2 years ago(hail damage), I was assuming the roof was original from 14 years ago, this was a pleasant suprise. Plus, he keeps all his lawn equipment at the duplex in a storage shed so he's giving me his, John Deere JX75 push mower, heavy duty edger, weed eater and leaf blower along with the property. Also he told me after we agreed on the price the property did not come with a washer and dryer, tenants provide there own. At first I thought this was a negative but then I realized this was a positve. I can buy used washers and dryers for probably $1,000 total and then demand a higher price for rent. If I can get an extra $15/unit/month x 115 Gross Rent Multimplier this adds an extra $3,450 in value to the property. Also, when I pitch any prospective seller I will pitch the vacant storage shed in the back as another oportunity to increase rent for the next tenant.

Time will tell if this was a good buy!

Yep, we settled on 145k. Attorney is preparing contract now.

I wish I had a contract I could just fill out on my own and send to the seller to sign ASAP. I hate waiting for the attorney to finish it.

Do you guys have a generic contract with you at all times that you can fill out on the spot?

Follow up question.

How much pretax income are you making on average per flip?

I need some motivation!

The story continues, I sent an email to the seller and explained to him how I came up with my offer price. Here is his response.

"Andy- Thanks for showing me your math. I am not the least bit offended, on the contrary I appreciate knowing where you are coming from. I would consider $165,000 to be a fair enough estimate for retail value. I am willing to subtract the $10,200 for a realtor commission, but would not be interested in handing over 20k for profit and/or errors. I would consider $155,000. I saw 300-302 Nikki a few years ago and it was a wreck. I would be happy to walk you through at your convenience. I was at 5210 this morning and have not seen a cleaner space since I lived there.

Let me know what your thoughts are"

On a side note I sent an email to the guy who bought my duplex 6 months ago. The duplex I sold is right next to the one that i'm looking at buying. I asked him if he was interested in buying another duplex in the same neighborhood. He said, "If you have more information about the duplex, I'd like to consider it."

He paid me 173,500 cash for my duplex that I sold him and that duplex only rented for 725/side and was not in as good of shape as the duplex im looking at. If I can get him to prove to me that he is interested in buying a better duplex for a similar price, I am tempted to buy the place for 150k and turn around and sell it to this other guy 173k and make my 20k profit.

My exit strategy if this guy ended up not buying it from me is to just sit on it and rent it and wait for the right buyer to come along.

If I buy for 150 i'd say there is a 70% chanse I could sell quickly and make 20k. I'd say there is a less than 5% chance i could lose money on the deal. I could easily sell it for what I paid. In the meantime prior to sale I will be collecting rent. Tenants are awesome.

Why shouldn't I do this?

Here is the seller response. Do you guys typically divulge your math?

"Andy-Thank you for your offer. Your number is less than I paid 15 years ago. Am curious to know how you arrived at the math. I would like to sell without the hassle, but your number more closely matches a run down rental than a well maintained property."

Just made my offer via email. $130,500. I went worse case scenario and assumed a 10k(6%) realtor commision then knocked another 5k off for negotioning room. I've give this offer a less than 10% chance of being accepted. I'll find out tomorrow.

Thanks for the replies. Not much time to reply but here I go....

Charles, maintenance costs is built into the fact that I'm only using half the rental income in my calculations.

motiv8d, i am confident in the decision but doesnt hurt to get the opinion of those with more flip experience than me.

Steve, I dont have a huge margin of error but i'm confident in my assumptions. I'm making 1.25% in a money market now, even if I sold after 6 months for the same price I would still make more money than keeping it in a money market.

Greg, I would try to sell asap, not necessarily wait 6 months. Maybe I should revise my net rental income calculations to reflect 3 months instead of 6 months. This way more if my profit will come from a lowe purchase price instead of rental income. The rental income wont be as high as I calculated if I sell after 3 months.

Keep the replies coming!

I know most here will rip this deal to shreds and says its too thin, but why? What am I missing. The property is a duplex in immaculate condition and rents for $1,500 per month. I know this neighborhood like the back of my hand, I used to own the duplex next door. The guy who owns the subject property contacted me and said he wants to move out of state and wants to sell his duplex, "make me an offer". I want to ideally hold this property for no more than 6 months and make a 20k gross profit. I could however hold indefinately if necessary.

165k(conservative current market value)
-800(purchae closing costs, paying cash, no mortgage)
-5000(realtor commisions, 165k is a low enough price i think I can get buy with 5000 in commisions, ideally sell without realtor though)
-800(closing costs at time of sale)
-0(repair costs, property is immaculate)
+4500(net rental income for 6 months after deducting 50% for expenses)
-20,000(desired profit from the deal)
=$142,900(max purchase price)

Awesome tenants, property is in good neighborhood. If I count the $4,500 in rental income I am buying property for 86.6% of current market value. I'm sure everyone and there brother will say NO DEAL at 86%, but why? Accordng to my numbers I'm getting my 20k desired profit so why shouldnt I buy it for $142,900 and flip it if my numbers are right?