Will you BUY this house?

I recently got a friend of mine to share a lead with me… and I went for it.

This is what I initially knew about this property:

While I was at the property I felt very compelled to do a video to share with my fellow-investors… and now, I am doing a blog to use it as a Case-Study for novice real estate investors to learn from this deal…or… potential deal… or… is it really a deal???

Based on my 20 plus years experience dealing with many different scenarios in real estate, I will say that this one is not-suited-for-beginners.

This deal is for an experienced investor who knows how to navigate the different levels of challenges when buying a property on probate, with fire issues, code issues, lien issues and heavy renovation.

At the end of the day, I will ask you 2 simple questions:

1. Will you buy this house?

2. Will you manage to make money on this deal?

Now, to answer the 1st question, we better answer the 2nd question first… and that will depend on how you analyze this property.

Here we go:

Asking price $75,000

Closing costs… about 4%… $3.500

If you borrow money from a lender… in this case, a hard equity lender, they will probably charge you about 2pts or 2%, but not on the purchase price…they might charge you on the ARV (after repair value) which if you add the values on the 7 homes on the same side of the property and divide it by 7, you will an average of $263,000… but knowing lenders, I venture to say that they will go for about $240,000 here…and from there, they might only lend you 70%.

 

In this property, you have to do a full rehab… which means, you have to re-do the plumbing, the electrical, the hvac, the bathrooms, the kitchen, the roof, the stucco, the paint… which is more than 35% and that means all current construction codes apply… therefore, you will need to pull permits and ideally hire a licensed general contractor.

Your cost will increase substantially adding your closing costs, liens costs, rehab costs… and if you are thinking to list the property with a real estate agent for resale purposes then add 6% to your list of costs.

The question is… will you buy this house?… and… can you make a profit?

After I did my homework, I decided to move on… and pass on it.

Once again, I realize that concentrating my efforts on building new homes is totally more fun and more profitable with less headaches.

Enjoy the video… and feel free to reach out to me if you feel I can help you!

 

~Ms. Pino.