a while back there was talk about some of the more wealty guys sharing some tips on how to make money. Since Enough of you ask I figure it’s time to teach a class. I am going to walk you all through the process.
Take notes.or share your own.
Before my trip to Vegas yesterday I walked a townhouse. I was considering buying as a 2 year hold to park 100k and buy some cash flow and a tax write off and 1031 exchange into a 4 unit building in 2028.
That plan changed upon arrival.
Here are the numbers
List price 193,000
Current rent 1400
Market 1650
Hoa 250
Currently special assignments none
Hoa covers all exterior maintenance roof, deck, laundry room swimming pool
Didn’t even get into the property to know it was a flip not a hold. Damage to Window blinds and entry door, stained carpet signs of mold in bathroom and diy construction.
Sellers representative was a family member who liked to talk so I went digging
The property was recently inharrited after someone’s grandmother passed, there is at says least 15 of work needed (that means 30-45) disclosed the mold I suspected all signs would point most people into looking at on e of the 4 other Available units in the same price point.
But not me. I see opportunity.
So I did some digging last night, the property last sold in 2015 for 66k. Unless it was held in trust they will be paying capital gains on anything above that price. There is also no Leins or mortgages on the property meaning the seller doesn’t have a minimum. And the property has been sitting on the market for 6 months. So something is up with it So now the question is how could this work? And that’s all about the numbers. Nothing else.
If the list price is 193k and I’m bringing cash and closing fast I’m getting 10% off that price.
That puts us at 175k
Let’s be nice and say there’s 30 in needed repairs that brings us to 145k
I’m going to waive inspections and take as is but I want about 10% off for doing so and taking tha risk. They don’t have tha inspection become public records that they would have to disclose ok a future sale for the next 5 years.
That puts the price at 130k
And because I’m doing all this work I want another 10k.
120,000.is the most I will pay. Otherwise I’m gonna go buy the renter unit and not take on the stress.
So what is our exit strategy and arv?
Because I’m now paying all cash and for a remodel this most likely now a flip not a burr. I do not want the debt to hold this property to have it cash flow properly.
So what can we sell it for
My agent just sold a like unit in the complex fully renovated fo 225,000
That means with closing cost and remodeling expenses we have to keep our total cash investment under 175,000 which was what we’re look to buy the other occupied unit for in cash. Leaving us with a potential profit of 50k if we hit our arv and stay on budget.
If rates drop we could potentially sell for 235in February. Or refinance the property in to a long term hold if we can get the number right. But th smart play here is to flip and move on to another property and take the quick cash
But This is an absolute green light Property. As you haven’t clear exit strategy.
How to decide to pull the trigger
The next step is to walk the property again with a contractor. I am one so I don’t need to but for appearances I will be walking it again tomorrow morning with my team that I’ve assembled.
Getting bids on all major works that cannot exceed 25k
Then then becomes a system. What’s the square footage. Get your finishes in budget and do some sweat equity and get out your paint brush and drill and get it done under 50k.
Simple as that.
There will be some hard ball negotiations tha will have to happen. And you have to ready to wall away if they don’t want to come down
So tomorrow I be walking it again, ready to make a boarder line insulting offer of 100k
I expect a counter so I’m hoping g to land around 125,000 and I’m. Going to be ready to make an contingent offer and have a couple ways out of the contract
Am I taking advantage of the situation. Some could say Yes slightly but reality is this house seems to be more of a burden that anything to the current owners but you have to look for opportunities where you find them and this could be one
The next questing is how do you do this without cash. You don’t, you sit out complaine that the system is rigged against you and you live in regret… I kid. What you would do is you would need to find a property tha would qualify for a traditional mortgage and if you are able to get an FHA loan that is always your first place to start as it allows for a low down payment with the only requirement that you call the Home your primary residence for six months. However, this Home would not qualify for an fha loan so yes in this specific situation cash is king and if you don’t have it you might have to sit this one out. but there is always a way to get your foot in the door
If you have any questions about the process or rehab budgeting feel freely to ask as I’ll probably be running all of the numbers tonight
Will follow up if I move forward or not
Take notes.or share your own.
Before my trip to Vegas yesterday I walked a townhouse. I was considering buying as a 2 year hold to park 100k and buy some cash flow and a tax write off and 1031 exchange into a 4 unit building in 2028.
That plan changed upon arrival.
Here are the numbers
List price 193,000
Current rent 1400
Market 1650
Hoa 250
Currently special assignments none
Hoa covers all exterior maintenance roof, deck, laundry room swimming pool
Didn’t even get into the property to know it was a flip not a hold. Damage to Window blinds and entry door, stained carpet signs of mold in bathroom and diy construction.
Sellers representative was a family member who liked to talk so I went digging
The property was recently inharrited after someone’s grandmother passed, there is at says least 15 of work needed (that means 30-45) disclosed the mold I suspected all signs would point most people into looking at on e of the 4 other Available units in the same price point.
But not me. I see opportunity.
So I did some digging last night, the property last sold in 2015 for 66k. Unless it was held in trust they will be paying capital gains on anything above that price. There is also no Leins or mortgages on the property meaning the seller doesn’t have a minimum. And the property has been sitting on the market for 6 months. So something is up with it So now the question is how could this work? And that’s all about the numbers. Nothing else.
If the list price is 193k and I’m bringing cash and closing fast I’m getting 10% off that price.
That puts us at 175k
Let’s be nice and say there’s 30 in needed repairs that brings us to 145k
I’m going to waive inspections and take as is but I want about 10% off for doing so and taking tha risk. They don’t have tha inspection become public records that they would have to disclose ok a future sale for the next 5 years.
That puts the price at 130k
And because I’m doing all this work I want another 10k.
120,000.is the most I will pay. Otherwise I’m gonna go buy the renter unit and not take on the stress.
So what is our exit strategy and arv?
Because I’m now paying all cash and for a remodel this most likely now a flip not a burr. I do not want the debt to hold this property to have it cash flow properly.
So what can we sell it for
My agent just sold a like unit in the complex fully renovated fo 225,000
That means with closing cost and remodeling expenses we have to keep our total cash investment under 175,000 which was what we’re look to buy the other occupied unit for in cash. Leaving us with a potential profit of 50k if we hit our arv and stay on budget.
If rates drop we could potentially sell for 235in February. Or refinance the property in to a long term hold if we can get the number right. But th smart play here is to flip and move on to another property and take the quick cash
But This is an absolute green light Property. As you haven’t clear exit strategy.
How to decide to pull the trigger
The next step is to walk the property again with a contractor. I am one so I don’t need to but for appearances I will be walking it again tomorrow morning with my team that I’ve assembled.
Getting bids on all major works that cannot exceed 25k
Then then becomes a system. What’s the square footage. Get your finishes in budget and do some sweat equity and get out your paint brush and drill and get it done under 50k.
Simple as that.
There will be some hard ball negotiations tha will have to happen. And you have to ready to wall away if they don’t want to come down
So tomorrow I be walking it again, ready to make a boarder line insulting offer of 100k
I expect a counter so I’m hoping g to land around 125,000 and I’m. Going to be ready to make an contingent offer and have a couple ways out of the contract
Am I taking advantage of the situation. Some could say Yes slightly but reality is this house seems to be more of a burden that anything to the current owners but you have to look for opportunities where you find them and this could be one
The next questing is how do you do this without cash. You don’t, you sit out complaine that the system is rigged against you and you live in regret… I kid. What you would do is you would need to find a property tha would qualify for a traditional mortgage and if you are able to get an FHA loan that is always your first place to start as it allows for a low down payment with the only requirement that you call the Home your primary residence for six months. However, this Home would not qualify for an fha loan so yes in this specific situation cash is king and if you don’t have it you might have to sit this one out. but there is always a way to get your foot in the door
If you have any questions about the process or rehab budgeting feel freely to ask as I’ll probably be running all of the numbers tonight
Will follow up if I move forward or not
