I have an opportunity to buy a soon to be rehabbed property for $350K at full price (or lesser appraisal price). The kicker is that I would have zero out of pocket purchase costs and wouldl receive $20K at closing. The property is a 3-flat and will rent at about even or maybe a positive $100-$150 cashflow on a monthly basis after PITI. No, that does not include vacancies or possible maintenance costs, although the property will be completely rehabbed and have an initial warranty. The property is in an up and coming neighborhood in Chicago (not just making that up, it is well known that new investment is taking place in this area). Although there are no guarantees, with the recent increase in business and investment in the area, I expect good appreciation if I were to hold for 1-3 years.
Looking to see what others think? Should I put this property under contract?
I would be very careful to do your due diligence on this property and
have your realtor and appraiser check out the value.Do not just go with the seller and his appraisal.Check out everything.
The property has not been appraised yet. I’ve had a realtor look at it and the price could range anywhere between $325K - $400K. The seller has agreed to not sell the property at more than $350K if it appraises for more but will sell for less if it appraises for less. Either way, I would have zero dollars out of pocket for closing and down payment and would receive $20K at closing.
The property did not match up to others in the neighborhood. The area has a certain architecture about it. This particular building was flat up and down brick. Similar square footage buildings within 1/3 mile had comps ranging + or - 15% from this building but they all had a great look to them… this one did not.
Yea, architecture is important. I’ve heard of investors taking 10-15% off of the comps with similar sq ft but better architecture. Like comparing a craftsman to a ranch or such.
Some people may make fun of my statement but imagine a whole bunch of multi-unit buildings that have brick overhangs, balconies, and gorgeously carved woodwork lined up and down the street. Now imagine that amongst these buildings is a building with approximately the same square footage (actually slightly smaller) that is a straight up and down beige building. No character.
That is why I won’t be doing this deal.
On to the next one.