All Forum Posts by: Patrick Deering

 Hey Crystal.  Thanks for the advice.  I may have come in a little too fast with such a low offer.  The property was only on the market for about a week.  So the seller didn’t even want to consider it…that’s now a bit more obvious in retrospect!  I did consider the owner debt when writing the offer.  I was able to pull the purchase history and the owner bought the property about 7 years ago for $45K cash.

 Hey Jay. As far as rental comps, really looking at current rentals in the area on Zillow.

Hey guys…looking for any advice on analyzing a deal and making an offer.  Some background, I made the decision to try to get into real estate investing about a year ago.  I’ve analyzed ~100 properties and made about 20 offers…with no luck.  I’ve taken a critical look at my risk tolerance to see if I’m being too conservative.  I’d say I have moderate level of risk tolerance, but if the numbers don’t make sense…they don’t make sense.

I wanted to break down my latest offer and see if anyone can give me some feedback on my offer…I may be missing something.  Here goes:

Property details: 3/1 SFH, ~1000 SF in Tulsa OK. The neighborhood is blue collar Midwest neighborhood. There are some recent flips close by, there are some well maintained properties and there are a handful of homes that need some love.

This house needs some love.  It needs a new roof/soffit/fascia, new windows, paint throughout, bathroom upgrade, 2’x3’ hole in the master bedroom ceiling from water intrusion, refinishing of hardwood floors, new HVAC/Furnace.  A decent amount of cosmetic repairs aside from the roof/windows. 

I’ve estimated $48K-$53K in repairs.

Asking Price: $130K.

ARV Comps in the area: looking back over the last 6 months, ARV comps range from $140K to $165K. The comps on the lower end were properties that were well maintained but weren't recently updated. The comps that were hitting the 160-165K mark were complete refreshes.

My strategy/offer: I planned on making this a BRRRR invest, hoping to leave minimal cash in the deal. I offered $85K cash and planned on using either a construction loan or a 401K loan to fund the rehab. For the sake of my example, I'll assume 401K loan to reduce my holding costs during the rehab.

85K purchase + 50K rehab + 1K holding (taxes/ins) + $4K refinance = $140K

Assuming I hit the mid-range for ARV I used $150K appraised value.

Refinancing at 85 LTV = $127.5K….so I'd leave ~$13K in the deal.

Total monthly expenses (mortgage/taxes/ins) $1,049 + (5% vacancy $60) + (5% CAPEX $60) + (2% MX $24) = $1193

Rental Comps in the neighborhood are $1175-1200/month

Sooo, I'm barely cash flowing with my numbers. If I do hit the full ARV of $165K, I'd leave $0 in the deal, but I'd be losing ~$100/month. Am I missing something in my analysis? I've made multiple similar offers on different properties but never close the deal. Any advice is greatly appreciated.




 

Newbie here, I’m sure this question has been asked.  I did some digging through the forums in an effort to try not to duplicate, but couldn’t find what I was looking for.

What analysis metrics do you guys focus on when analyzing a deal? CAP rate, CoC Return, etc.

I’m sure it’s area and/or property type dependent, but with the state of the market as a whole, what do you consider good targets for the metrics you use?

Thanks!