As we film Episode 30 of our video series “Real Estate Deal Talk” it’s “Super Tuesday” in Georgia, which means all the tax sales, foreclosures, etc. are happening on the courthouse steps today. And just this morning we got a call from one of our lenders saying, “Listen, I’m going to be foreclosing on this property, and you’ll want to go check it out. It is a good deal.” And we said, “OK, you know what? You’re a lender; it makes sense. Let us run the numbers.”
So here are the numbers on this specific deal that is going on the steps today in about 15 minutes. And I am super-super jazzed and excited about it. It’s an interesting deal!
The acquisition price is going to be right around $125,000 and—if we get it at $125,000—the ARV on this property is about $235,000 to $250,000.
The property is nearly complete, but as it stands right now, the current owner can’t finish it. He did not pay his bill. He probably didn’t run his numbers right or maybe he mismanaged his crew, his contractors. Whatever the case, it didn’t work out.
When smart investors capitalize
And that’s when investors like us who are smart—just like those who are watching this video—this is how we capitalize. We make money on these deals because we can now purchase this on the steps if we are the highest bidder. So, worst-case scenario, if we purchase this at $130,000-$135,000 and we put in another $15,000 to $20,000, so $155,000 at most, with contingency at $160,000, if we sell it at $250,000 we’re in this home for right around 58 percent to 60 percent of fair market value. Awesome!
And the best part of it is, this property is almost done. You can look at the siding, look at the job that’s been done already. The steps are done. The driveway is done. The fence in the back of the property is done. Now we have not taken a look at the inside—I think there’s somebody from the construction crew who’s living on-site.
So even if we’re a little bit over—that’s why I included that little bit of that error and that margin in the budget—even if it’s $25,000 we’re all-in at $160,000, it’s still a winner. Even at $165,000—it’s still a winner. $170,000? Still a winner. $175,000? Still a winner!
I don’t believe in playing into the hype
And my percentages in a hot market like Atlanta are still consistent with what I want. Keep this in mind: In a hot market, I want to buy lower than everybody else because I want to pass on more deals than everybody else. Because I don’t believe in playing into the hype. So 60 percent to 65 percent of fair market value minus the cost of repairs is where I’m going to be. And if I really want a deal that I know I can flip really fast, I’m willing to pay a little bit more for that.
So again, the number breakdown for this:
- $160,000-$165,000-$170,000 at the most – (we don’t know what we’re doing on the inside).
- Selling at $249,000-$250,000.
Oh man, this is a winner of a deal!
This is the East Lake neighborhood in Atlanta, just south of Kirkwood. And just like Kirkwood, this neighborhood is absolutely on fire!
At 10 to 15 days on market, we’re looking at a pretty good net margin.
A great deal for a beginning investor
For those of you just starting out in real estate investing, this would be a great deal to take to a hard money lender and to get your feet wet. And even if you have to pay a little bit more to get the deal done, you know what? You’ve built that into your margin on the front end anyway, and you’ve built that into your total cost, so it’s a slam-dunk deal!
So, I’ve got to go. Because I’m going to go make this offer and get this sweet property and I’ll let you know what the outcome is.
What I’m going to be including in my videos now is additional context and follow-up with what is happening with the deals we talk about. That was recommended by you, our viewers, so I thank you for that, and I will be sure to continue and tie off each storyline appropriately as we go.
See you soon!
You can view Episode 30 of “Real Estate Deal Talk” here: https://www.youtube.com/watch?v=xxgIZBDkROw
About the Author
Abhi Golhar is the host of “Real Estate Deal Talk” and Managing Partner of Summit & Crowne. Abhi uses a “value-added” approach to invest in real estate renovation, new construction and development opportunities in the Southeast United States. He actively educates and works with investors to deploy market-driven strategies that yield success. He holds a B.S. in Electrical Engineering from the University of Michigan. You can find him on Twitter, Snapchat, and Instagram – @AbhiGolhar.