I’m looking at this 2-family home with a bungalow on the property. One of the apts in the 2-family is rented for $750 a month…the other is vacant. The bungalow needs a “major overhaul”.
A realtor ran comps…said the 2-family would sell for about $160k, and with the bungalow fixed it may be $175-$200. Kind of a slow market area.
The tenant wants to stay. The second apt needs upgrading. I estimate the work needed in the 2nd apt plus roof to be about $15k. Would this deal look attractive to an investor if they could have it for $102k, including my assignment fee?
Work in 2nd apt: $15k
Price for my buyer: $102k
Equity $43k…plus the gross rent income is at least $750/month. Plus bungalow.
Thanks for any input!
Are these all on the same parcel of property? Can the duplex and bungalow be sold separately?
You didn’t really say what the numbers are?
What are the total gross rents after everything is fixed up? (all three units)
What is YOUR estimate of the market value? Is the realto that gave you the comps the same that is involved in the sale? What is the repair estimate on the Bungalow? Is that materials only or labor and materials?
You need to know all this information to make an intelligent decision.
I believe they are both on the same property and cannot be split. I’m trying to evaluate this enough to save myself the hour trip if it’s not a viable deal.
I’m trying to work the numbers aside from the Bungalow.
The ARV of $160k is from my realtor. Each of the 2 apts in the 2-family can be rented for at least $800 (the one has been rented for $750 for 4 years) She wants to stay.
My repair estimate for the un-occupied apt plus the roof is $15k.
Is it viable for an investor to buy the property, fix up only the roof and the un-occupied apt, and then either hold or flip…without touching the bungalow? I know the bungalow would increase both the ARV of the property and the total repair costs.
The short answer is no. This is a poor deal (for an successful investor) as a rental, with about $25 per unit per month negative cash flow. YUK! That is IF you are right and the rents can be raised to $800 per month (easier said than done) and IF your repair estimate is right. So, everything really comes down to the bungalow. If the repairs on this could be made cheaply and the rent is high enough, that could change this deal. I doubt if that is possible.
If this were in a “hot” market, you could probably do this deal and sell it to a newbie. Remember, the vast majority of newbies pay retail and then fail in a short period of time. Unfortunately, you said that this is in a slow market. In my slow market, the real estate flipping fad is over and the number of newbies has drastically fallen.
Personally, I would pass. The max I would pay for this deal is $65,000 (not considering the bungalow).
Thanks Mike, that makes lots of sense. I had told him my offer would be around $80k, and he came back with $100k, which is why I was trying to see if that would work. Just doesn’t.