Hey Folks,
Remi here again-- I am still working to get my first wholesale deal, and I think I may be close. A little background on the property I am pursuing:
I called about a Craigslist post, and reached the motivated seller. She has a small house about 1 hour outside of Atlanta. The property is listed as a 696sf, 2/1 with an unfinished basement. The basement is another 696sf.
My initial thought was to get the property rezoned and convert it to a duplex. After some back and forth with the county, it doesn't seem that that's going to be a possibility. My new thought is to make the basement a master bedroom, with another "bonus" room to add some square footage and be more attractive to investors. I know that a basement bedroom is less than ideal I feel the extra square footage would be better than not having it.
I also wanted to add on to the house, but it's a tiny lot and the house is pretty close to the property line. I thought about adding another story, but she just had the roof replaced a couple years ago, so that would be a waste. There is some ability to add on to the front of the house. With respect to the tiny lot, the seller has spoken to neighbors, and is trying to connect me with them. She believes they may be interested in selling a portion of their land.
I can't find any relevant comps myself, so I had two realtors pull them for me. Same story-- the house and the lot are both tiny, relative to the neighborhood. The best I can think is to use the average PSF sales price on the closed sales for the 1392sf to estimate ARV. The lot size is about 1/3 acre, and most of the comps had lot sizes up to 2.5+ acres. Sales prices on these comps were up to $400k+.
The seller mentioned that she has rented the property previously, and was able to get $795, no problem. The house is walking distance from a shopping center that also has a new hospital, so I think the area is a good investment. Today, she even remarked that they were building some walking trails in the neighborhood.
Seller is currently asking $90k, but without knowing good estimate of ARV, I don't feel comfortable with that amount. I think an offer of $70k would be safer and allow for a spread. I made a mistake in asking about the mortgage during the first call, and she was not willing to divulge that information. I was able to find a deed online, and it looked like she had a mortgage of ~$72k about 10 years ago, so she should have equity in the property by now, but I don't know how much. I also floated the idea of a wraparound mortgage to get her closer to the amount that she wants, but she didn't go for that.
Based on the average PSF ($125psf) for the comps I have, the ARV should be around $174k. I had a contractor go out and give me an estimate of the rehab. He gave me verbal for $50k to do the upstairs ($30k) and convert the basement ($20k) to a duplex. I am waiting to estimate to make the basement a master versus another unit, but the contractor is out of town currently.
My questions for you all:
- Will a basement master suite with bonus room be appealing to a renter?
- Is there anything I can do to better estimate the ARV, given these unknowns?
- Would finishing the basement as a master suite and another room be priced comparably to creating another separate unit? Cheaper? More expensive?
- Is my MAO of $71,800 fair?
- Any tips to get her realize that I won't be able to offer her $90k and still make a profit other than showing her the SOW that my contractor provides and walk her through all of the things that she didn't mention when we had our initial convo?
