I love this deal! We are under contract for this house for $60,000. As you can see in the video for Real Estate Deal Talk Episode 22, it is in terrible condition. So why am I excited? Because of what’s going on across the street.
That is a one-story, three-bedroom, two-bathroom home, about 1,800 square feet. Once that investor is done with it, he is going to sell it for about $450,000, which is huge. He told us he got that one for $60,000 as well. His renovation cost is probably about $120,000 to $130,000.
So you can see the spread. Even at worst case—$150,000 for renovation—I will take that deal all day. All-in cost, not including finance, at $210,000, selling at $450,000. Come on baby! Yes! He also is under contract for $60,000 for another home across the street. How cool is that?
Our project is going to be a complete teardown, probably similar to what he is doing across the street. This currently is a two-bedroom, one-bathroom home, close to about 800 to 900 square feet. Really small, and as I said, in really sad condition.
We will keep the red brick and the existing foundation. But we are going to tear everything else down and expand the footprint so we will get somewhere between 1,600 and 1,800 square feet. We haven’t decided yet if we are going to do a two-story or one-story. But if the investor is keeping the one across the street to one story, we may do the same on this one, just to keep it nice and simple.
So we are looking at 1,800 square feet, three bedrooms, two bathrooms, eventually selling for right around $450,000. Our cost is just around $150,000 on top of the $60,000 acquisition fee. Even with the absolute worst case of $230,000 in total costs, if this sells for $450,000 then that’s a happy day.
Here is how we found it: Wholesaler. I am not kidding—this wholesaler called me. You gotta love them—I do! So, if you have a deal and you are in Atlanta, Charlotte, St. Louis or Dallas, call me and we could have the opportunity of a lifetime to crush it together.
Here is how we evaluated it just from the initial numbers. We looked at active comps and sold comps within a quarter mile, at 90 days, 60 days, 30 days, to get an idea of what the trend is like in the area. That is going to be really, really critical whenever you are going to sell a home on the back end.
As far as structuring capital, we haven’t really decided yet. There are a couple options: hard money or private investors, or your own cash. Just look at the numbers and see what makes sense.
Eventually, we will have to position the deal for sale. Before we buy this thing, we are going to bring in an agent and make sure he or she really understands what is being sold in the market and what we need to do to stay competitive on price and finishes, and everything else that we need to do to make this home a success.
So far, this looks like we’re on our way.
You can see the entire Episode 22 of Real Estate Deal Talk here: