Buying Land With A Foundation In Place

I am working with someone who owned a house that burned down and is now left with the slab of the house. He now wants to sale the land. The property is in a not-so-great area and most of the houses are valued at 85-95k. That particular house was valued at 87k before it buned down. He owes $2500 in taxes. what can I do with this?

Comments(3)

  • commercialking16th August, 2004

    How big do these houses tend to be? If we had a size we could determine an approximate cost to rebuild-- then you could figure out whether there is any money to be made.

  • bnorton16th August, 2004

    Raquel,

    Generally, a good rule of thumb is that depending on quality, a stick built house will cost $100 or more per square foot. A prefab house can cost as little as $50. So if we take the formula 70% ARV - rehab/construction cost - holding costs = Maximum offer, and assume a small home of 1000 sq ft it would look like this:

    Stick built - 70% of $95K = $66,500
    $66,500 - $100,000 ($100 * 1000 Sq Ft) = -$33,500 Already in the negative - No deal here.

    Prefab - 70% of $95K = $66,600
    $66,500 - $50,000 ($50 * 1000 Sq Ft) = $16,500 Ok so far so good.
    $16,500 - holding costs (6 monghs hard money financing, insurance, taxes, closing costs X 2, sales cost @ 6%) In my neck of the woods that would be somewhere around $19K = -$2,500

    There could still be a profit on the back end, but you cannot offer much. According to my calculations here the maximum you could offer is to have the seller pay you $2500 to take it off his hands.

    I'll pass. too tight for me.

  • bnorton16th August, 2004

    Another thought: Depending on zoning, you may be able to put a mobile home on the property. That might actually make it worthwhile.

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