I was wondering if I could get some advice from those of you with experience!
My ultimate goal is to get into real estate – apartment complexes / hotels etc but I need to start somewhere so I am looking at buying a residential property and flipping to start getting some cash in my pocket.
I am a 22 years old recent college grad and I am currently a credit analyst underwriting real estate loans for a bank.
Through some networking I met someone who wants to sell his parents house and needs the cash to help with his moms current bills. The house is NOT listed on the market currently.
Now the question… should I take the leap?
The house has had only one owner, no kids, no pets etc. The owner kept the house very nice, but everything in the house is outdated…needs new carpet, paint (outside), landscaping, appliances etc. Most of the stuff I can do myself with my friends, but it does need some work.
Cost of house: $120,000
Comp of houses sold in the neighborhood: $145,000 - $175,000
Loan is $125,000 @ 4.5ish% with 5% down.
Will put ~$10,000 into the house
Taxes: $2200
Ins: $160ish
Sewer $15/mo
If it comes down to it the property would probably rent between $850-$950.
Good neighboorhood, just blocks from $1million dollar houses
How did you come up with this rehab cost?How many sq.ft is the house?Give me as many details as you can about what is “outdated” and I’ll give you a ballpark figure of what you may spend.Oh and you always want to add an extra amount for any surprises that pop up(and they will).
Also are your comps sold or just listed properties,if sold how long ago and how long were they on the market?I don’t think renting at that figure will work for you,unless you want to add $$ monthly to cover your note.
Get me somemore details and I’ll be happy to help,but for now it does’nt appear to be a deal I would do (according to your info this far).Hope I can help. :cool
I am not sure where to look up accurate rent rate, but from my research the area seems to rent from $750 - $1200
It is about 850 SF. 2 bed 1 bath.
We walked through with a contractor… he ball parked $5000 to fix everything up. We would re-carpet all rooms, pull up carpet in the dining room/living room and use the hardwood floors underneath which are in great condition, paint rooms, add new appliances - stove and fridge, power wash outside of the house and repaint, and landscaping.
I added $5000 for unexpected costs.
All comps are new sales within the last 6 months… not sure how long they have been up. Similar houses (sf, b/ba, area) and went for $145+ range.
I plan on putting the 5% down and using the rest of my cash (~10K) to fix it and then sell it as soon as possible in the $150-160 range. I would only rent if that was last choice. I need to get some cash into my pocket and a house under my belt. Ideally I would flip this house and make $20K on it and take that money and put it into another house and continue from there
This does’nt sound like a good rental.It really does’nt sound like a good flip either.But I can understand you wanting to get your feet wet and if it truely is a lipstick job you could walk away with some profit.The numbers don’t work at all for it to be a deal I would do though.
I’d hate for your first real estate experience to be miserable and chase you away from this business.In my area 1 baths are just rentals.I never consider them unless I can add a bath easy(I’ve done that and made good money).I would get back in the trenches and dig up a “no brainer” so you’ll enjoy the businesss rather than regret it.
Let me know how it goes and feel free to run anything else by me.Happy to help. :cool
I agree with sellnbama. Theres not money here. And we all know lipstick jobs are never the amount they appear to be. I think you can find a better deal. I know your excited to do your first deal but don’t rush into this. Not in this market. You need to do DD (due diligence) and take your time!
