Guys I am pretty new to real estate and trying to get my first deal. I have a couple who has a duplex or 1 unit in a duplex that they want to sell. It already has a renter who has been renting with them for two years. The numbers look something like this:
Retail Estimate - 95-98K acording to zillow and city-data.
They owe - 85K
I contract it for - 85K
Then flip for - 92K or around that number.
It needs NO repairs, is in a nice neighborhood and already has a good renter for 865 per month.
My question is based on that information do you think it is a “good” deal from an investor or landolord standpoint? Thanks for the advice. I love this forum!
From the looks of your numbers this isnt even a partially profitible deal for you. You need to find deals with a better profit margin. I’d have to agree with the last post that pfront profit will be eatin up.
It could be a good deal if you can also get $865 for the other side, can get the entire duplex for 85k and if the appraisal comes in high enough. Zillow and citydata are not realistic places to check for values by any extent. Based on the rents, and if the property is a true duplex (built as one), then your value for the entire building is probably in the 140k-150k range. That being the case you can buy it for what they owe and resale it to an investor for about 98k. Don’t buy just one side, it’s not worth it; buy the whole thing for 85k and it’ll be a great deal.
The math would look like this
sales price 98k
less loan payoff 85k
less closing costs 2k
less misc expense 1k
net cash to you 10k
of course this all depends on the appraised value and the neighborhood. If the value is high enough you’ll have enough spread to make it work. Check with a realtor and get a comparative market analysis just for a basic estimate. Call some of the other land lords in the area to confirm that market rents truly are in the 865 per month range per unit. And finally get an appraisal if you feel that the deal is worth doing.
gregandandrea: If it’s a duplex and the other side generates 865 also, it may be a decent property - even then you have to look at operating expenses, real estate taxes, etc, compute the CAP rate and compare that to the CAP rates at which similar duplex are selling (that’s just one strategy).
In general, if the retail value is 95-98k, you buying for 85k and trying to flip to someone for 92k is a disaster - you’ll not only not make a dime, but also won’t find a buyer at 92k. Savy real estate investors these days are shooting for below 70 cents on the dollar (70% of after-repair value). That would put your property at ~65-70k.