This is my first post and I am grateful for all of the outstanding advice you give to new investors. Here is my question.
I am opening escrow on my first investment property in California. I am purchasing the property for $383,000. The comps support $460,000 - $470,000. It should cost me less than $5000 to cosmetically fix up the property. My plan is to re-list it for retail immediately after I close on the property. The residence is vacant and the owner lives out of State. The house fell out of escrow the previous time the seller tried, so needless to say, they really want out of the property.
I am using traditional bank financing, however I am hoping to flip the property extremely quickly so I don’t have to pay more than one or two mortgage payments.
After all the fees and fix-up costs, I am hoping to make at least $30,000 on the deal.
Is this something that sounds good or am I way off in thinking I have a decent thing going here? Any comments would be much appreciated.
Thanks very much.
if everything is as you say, then yes, it’s a good deal.
be aware that seasoning may be an issue for some lenders as you try to sell. what’s your plan if you can’t sell quickly? How will you finance fixup and holding costs? You have an exit strategy, but you need plans “B” and “C”.
Why hasn’t it sold?
i think you should be careful.
right now the market in CA is terrible. its probably been on the market for a while, which is why the owner is ready to offload it to you at a discount.
assume, you’re in it for 400k[after closing costs and fixup]. and then you sit on it for 6 months and then sell it for 450k. after agents commissions, holding costs and taxes, your profit will be around 10k.
this is too slim of a deal.
I would not do it.
Thank you to you both for replying. There is definitely a lot to think about. The house was on the market for approximately 90 days before it was purchased. It then fell out of escrow due to the buyer not being able to qualify. It went back on the market at another huge discount. I picked it up a week after it was back on the market.
I have enough cash in reserves to hold on for five months. I don’t THINK I will have a problem selling in that time as the average in that area is 90 days. I am going to start the price fairly priced for the neighborhood. If there is no interest in a week or two, I will drop it down again.
I hope my plans B and C won’t be necessary. If they are I will try to rent it out, lease option, etc…
Any other thoughts?
Thanks again.