Is This A Good Start?
Hi. I'm just beginning and found a property I think might give me a decent ROI and would really appreciate your opinions. I'm not sure of how I found this site, but am sure glad I did! I'm riveted!
The property is REO, located in a desirable school district within walking distance to the middle school, and very close to the elementary and high schools. 3 bedrooms, detached garage. Comps are between 75,000 to 80,000.
Original asking price was 45,000 down to 39,000 currently. A contractor assessed it to need 20,000 in repairs, max.
I don't know what else I need to know to decide if it would be a good investment. It seems like it would be, as I thought I could get a return of at least 10,000 for a quick sale after repairs.
What do you think?
Jeannie in PA 
[ Edited by JeanMarie on Date 12/11/2003 ]
1. Make a list of all repairs needed to be done. Overestimate the repairs.
2. Calculate 6 months holding costs for a rehab. Obviously we want to turn it around much faster but estimate long. Holding costs include: mortgage payment, property tax, utilities, & insurance.
3. Selling real estate commission. Always include this even if you don't need it. Again the name of the game is estimate high.
Then find a the middle to low end market ARV. Sure the property may be worth 250k but if you wanted to sell it within 2 weeks what would you price it at? Maybe 220?
Take $220 and subtract improvements PLUS 10%, holding cost, and realtor commission.
The difference between this number and what you can buy it for is your potential profit.
Thanks for the advice, myfrogger. That will definately help me to decide on a bid price. I was thinking if I could get it for $35,000 it would work, but I think I need to rethink that down a bit.
Next thing, do you have any suggestions on getting funding for the purchase AND the rehab?
Thanks again,
Jeannie[ Edited by JeanMarie on Date 12/13/2003 ]
jean, have a preliminary title check run too. i know pittsburgh and "quip town", so i can give you the number of a local searcher who can do this for cheap for you - especially if you tell her you'll be back for property all the time and use her. make sure there are no federal or state liens, utility, locality, etc. liens on the property. then check for last owner as well - same info. if all is well, then take what myfrogger said and you have all that you need to make a sound decision.
good luck!
Thanks Jackman, I'll be happy to take that name and number.
So, you know "quip town", eh? Small world, isn't it??
Jeannie
sure is. i lived in pittsburgh for about 12 years during and after school and met quite a few quiptowners.
i'll pm you the name of the searcher.