Need Advice-buy/upgrade/resale
I am considering a new venture. I live in an area where 300-500K houses are very common. Also, the area is one of the best school districts around. What I am considering is buying a SFD that is priced at 192K. Basically the house needs substantial upgrading, IE: new kitchen-baths-patio etc. I am speculating that I can do the work myself (I am a retired GC) and the material cost will run me about 40K. This is using top quality materials. I am also going to put in a new mahogany front door unit-french door unit in the rear of the house-modernize the family room-add a 4th bedroom/den in the basement (with egress window), it already has a bath right next to the new bedroom which I will replace all fixtures etc. My question is this. If I pay 192 K for the property and invest 40K (plus my time-about 4 months) can I resell this house for 325K? The neighborhood can accomodate this price. Figuring about 35K for buying/selling/carrying this property, is this a reasonable return on my investment? Any help would be greatly appreciated.
With a purchase price of $192,000.00+75,000.00 rehab and holding cost=$267,000.00. If you can sell for $325,000.00-$267,000.00=$58,000.00 potential profit. If you are using all cash you would have an annualized cash on cash return of over 60%. Try getting this in the stock market.
Your second question was answered for you, however only you can decide if that is a reasonable return.
As far as can you resell it for $325K, no body here can tell you that. There is way more to a houses value than what you pay for it and what you put back into it. The house could have defects that will cause it to not resell at the same prices of other houses in the neighborhood. If it has a single car garage whereas all the others have 3 car garages, it will not bring the money, on the other hand if it is sitting on a premium sized lot on a cul de sac it might bring above average money.
Get the idea? You need to do some foot work by looking at true comps in the area and discovering how this house fits into the neighborhood. If when you are done it will have all the features of houses sold for $350,000 then it should bring close to that, on the other hand if it has features closer to houses that sold for $300,000 then that is what you should expect.
Don't expect to polish a turd and end up with anything other than a shiney turd. Polish a diamond in the rough and you end up with a beautiful sparkling diamond.
Good luck[ Edited by The-Rehabinator on Date 04/16/2004 ]
I believe you can. I have been dealing in the South Hills for the last 18 months. I have seen many investors like you buy and sell properties in USC and MT LEB and walk away with 60K to 75K many times. There is a market and if you can do the work at your own pace you will be better off. As you know if you get a contractor out there they will want the USC price.
I will give you a little advice, once you buy the house dispute the assessment to match the sales price. It will reduce your holding costs and allow your buyer more flexibilty with the purchase.
Lori
[addsig]
The above advice is very good. I would only add this suggestion; In addition to the comps, take your mind's eye vision of what the house is going to look like finished and compare it honestly to other homes on the market. This will give you a preview of how your project would compete.