Is This A Deal
looking to purchase a rehab and here is the info I have on the property. The seller is looking to get 55,000 for the property. I had a contractor look at the house and he estimated about $11,281 to get it into "rental condition". Comparables with 3bdrm/2 bath are selling for around $70,000. How much should I offer for this property? Thanks!!
Sweat equity can cut your cost way back from $11k. I just did one with very similar #'s but I only paid 48k and my repairs were 4.2k. Remember your offer has to account for the repair work, so don't give away your profit to the seller who hasn't done any of the work. I would be comfortable with 46k offer if I could do the repairs myself in less than 4 wks. and get it down from 11k to about 5or6k. But that is my comfort level. \
What is yours?
Scott
What would you expect to get for rent in the area?
If you're going to rehab and resell, this is not a deal. Even as a L/O or rental property, it's not much of a deal. The owner basically wants full price for the property. I'd say pass, unless the owner is willing to give you financing, or unless you've got NOTHING else going on and a lot of cash. In which case I'd devote my time to finding better deals.
Thanks all for responding, I really appreciate it. I am getting mixed reviews though. The property could rent out at about 550/month. It is less than 1 mile from an Air force base, so I know it would rent quick. Like I said before Comps at 3br/2ba are going for aroung 70k. Once I rehab the house it would be a 4br and 1bath. Any other suggestions or adivce? Thanks
Are you saying after rehab it could rent for $550? I'm a cashflow guy, not a flipper, for something that would rent for $550 with no rehab I would offer no more than 38k, but that's at my tax rate and estimated 8% interest loan
Use MAO formula:
70000 * .7 - 11000 = 38000K
Maximum Allowable Offer
Yes, I was thinking about structuring the offer like this
ARV: $70g (around)
seller wants:55,000
fix up price" 11g--contractor price
which brings the deal down to 44,000
1st deal-- $4,000 worth of dumb mistakes= offer 34g
give me some input
Would be on the forefront a good deal for you, but you have forgot one important factor in the art of negotiation "Your WIIFM"!
Your customer needs to know "What's In It For Me".
Do you know the amount owed by your customer if any?
Do you know how your customer came up with the asking price?
Do you know what your customer plans to do if the home sells?
Do you know what your customer plans to do if the home does not sell?
It's called customer motivation; with out it you have no deal.
It takes just as much time and effort with a bad deal as it does a good deal.
Looks like you have ran your numbers, but what about your customer?
At a minimum I would factor in a 10K profit and holding costs for 6 months. Otherwise you get a "paid experience" 3/2 are worth more than 4/1's and so your comps are negligeable at best. YOu should find out what a 3/1 and 4/1 is going for and then you would have realistic comps. Who would want 4 bedrooms and 1 bath? I mean you would have a real rush hour in the morning
3/2's are the bread an butter unless you get a steal on the property.
YOu need to read a couple of books, Buy it Fix it Sell it and Profit by Kevin Myers and the book by Jay decima on rehabs would put you light years ahead of where you are now (which is poised to make a costly mistake).
[addsig]