I Just Came Back From Looking At My 1st Rehab Property
I just came back from looking at my 1st rehab property
Which is located directly across the street from my house. It is on the market through a realator for 50,000. The original owner passed away and the property has not been occupied for years now...
The property is 1296 SqFt and needs new carpet wall to wall throughout the house except back room which is hardwood. The kitchen needs to be remodled with a new stove and refrigerator. New flooring in the bathroom.Wall to wall painting through out the house and 14 new windows. I seen water 1 mark on the 1st floor and 2nd floor. Basement seem ok... Now with all this information from a rookie and the retail property value being 81,000 does this sound profitable??
I was thinking of calling some one who works on roofs to check out those water stains before making a cash offer. There is another investor taking a look at the property today so I didnt want to waste no time. I was the 1st person to look at the property and it has been on the maket for 8 days?
One thing I forgot to mention all the utilities are shut off so I couldnt confirm anything working.
wll if your serious you should get the owner under contract asap, maybe with a small earnest money deposit
Now with all this information from a rookie and the retail property value being 81,000 does this sound profitable??
well the answer to that question should be obvious to you...do the math..
50,000 purchase price, and 81,000 resale value after repairs...
as long as fees, holding time, and repair costs dont cost 31,000 the deal should be profitable...
once you have the owner under contract w/ a weasel clause ofcoarse, you can back out if any inspection shows serious problems that you dont want to handle
its pretty simple stuff...just be thorough and stay confident
~Andrew
Quote:
On 2005-01-04 12:51, Young_Inno_Vative wrote:
wll if your serious you should get the owner under contract asap, maybe with a small earnest money deposit
Now with all this information from a rookie and the retail property value being 81,000 does this sound profitable??
well the answer to that question should be obvious to you...do the math..
50,000 purchase price, and 81,000 resale value after repairs...
as long as fees, holding time, and repair costs dont cost 31,000 the deal should be profitable...
once you have the owner under contract w/ a weasel clause ofcoarse, you can back out if any inspection shows serious problems that you dont want to handle
its pretty simple stuff...just be thorough and stay confident
~Andrew
Thnks i was thinking of offering 40k in cash due to the fact the work that needs to be done and that the owner seems like they are really just trying to get rid of the property. I know the earnest money for a reo property is 1,000 which at this particular time do not have(holidays)..
Have you pulled comps on it, to verify that 81k is truly the FMV? If you're confident that's the FMV, put it under contract with a small amount of earnest money, contingent upon it passing a housing inspection by a licensed Inspector. 31k is a fairly small spread on a house that's been sitting empty for several years, and you know it's got water leak issues. Also, keep in mind that unless you got that kinda cash sitting around, you're going to have closing costs, finance costs, plus holding costs. Also, unless you're going to be doing most of the work yourself, labor costs can eat up a margin like that, too.
MAO=Profit-Holding/finance costs-repairs.
MAO=Maximum Allowable Offer
Profit=How much money do you want out of the deal
Holding/Finance=Insurance, Taxes, Points, Closing costs
Repairs=How much will it take to make it marketable
Good luck with it!
Well, it sounds like windows are going to be the majority of your rehab expense. Price them out...my guess is you will be looking at $10K to $18K alone for the windows and installation. Your $31K spread shrinks fast...in addition you are talking about roof work which also can be expensive.
You will need to pencil everything out and see where you stand. Don't forget about holding costs and some cushion...and resale costs if this is your intension.
Quote:
On 2005-01-04 13:06, jam200 wrote:
Have you pulled comps on it, to verify that 81k is truly the FMV? If you're confident that's the FMV, put it under contract with a small amount of earnest money, contingent upon it passing a housing inspection by a licensed Inspector. 31k is a fairly small spread on a house that's been sitting empty for several years, and you know it's got water leak issues. Also, keep in mind that unless you got that kinda cash sitting around, you're going to have closing costs, finance costs, plus holding costs. Also, unless you're going to be doing most of the work yourself, labor costs can eat up a margin like that, too.
MAO=Profit-Holding/finance costs-repairs.
MAO=Maximum Allowable Offer
Profit=How much money do you want out of the deal
Holding/Finance=Insurance, Taxes, Points, Closing costs
Repairs=How much will it take to make it marketable
Good luck with it!
Thnks for the feedback I was thinking about all the above. I was going to reply back to them with a 40k offer to see what the owner says.
All the stuff you mentioned is pretty much cosmetic and not a big deal for a DIYer. You did not mention wiring (up to code), furnance, or type of water pipes. Depending on the climate if not occupied for a couple years and cold winters - expect to have some water pipe repair done. In the houses I've bought no matter how well winterized - had pipe leaks that needed to be fixed from sitting through winter. I would have someone check the roof. If shingles are curling - it needs replaced. I would go look it after a good rain.
My thoughts (assuming you are doing work)
Carpet and Floor - 1500
Windows - 2000
Painting Supplies - 200
Kitchen Cab - 1000 (Menards unfinished)
Roof - 2500
Stove/Refrig - 1000 (Not Necessary if selling)
Misc (unexpected) - 2000
Financing and Taxes - ?
funance/Water heater - $1750 (good selling point)
Selling Expenses - 4800 (6% realestate co)
Potential profit around $15k - again assuming you do the work.
If you can sell for 81K
I made a bid of 40000 and they finally responded saying someone else made a higher bid. When I asked what that bid was they told me that they couldnt disclose that information to me and asked If I wanted to make another bid?
Is that true in reguards to making a bid on a property that they cant not inform you about another bid made?
Did you make an offer via the same agent that's selling the place? If so, then they can't divulge that kind of info - it would violate their fiduciary duty to the seller. Ask the agent if they have a suggestion as to what price to offer. They may not be willing to go there either. Then it's a matter of guesswork, and you're probably being played against another buyer (or they're bluffing).
Ask if they're willing to counter your offer with one that makes sense for them....
Or failing that, make your best offer and let the deal fall where it may.
Right on! After all, it didn't seem like there was that much room in this deal anyway. As one poster calculated, the profit was 15K...with you doing all the rehab yourself. This is more work than I would do for this kind of margin...even if the house is right across the street.
My guess is an owner-occupant put in the higher offer. This property could probably work well in this case and maybe not work well for an investor.
I would ask for a counter. If they say no, I would move on. If they offer a counter, re evaluate your numbers and decide.
Yes, see if you are dealing w/the selling agent.
Is this property in foreclosure? Is it in a bidding process like HUD or VA?
If you are dealing w/the selling agent they might be willing to meet you half way w/flex commission for a higher bid, ask them.
See when they are presenting offers, or if it is a sealed bid process where they don't know the particulars of other offers.
Use all of the strategies listed above to dance forward if you really want this, but do not overpay.
You never did answer how you determined your FMV. Be sure you are using todays values!
_ Do ask them for a counter and listen carefully to the response. Did you put contigencies in your offer that you could change? Finance. Inspection. Fast close.
Quote:
On 2005-01-06 13:35, ceinvests wrote:
You never did answer how you determined your FMV. Be sure you are using todays values!
_ Do ask them for a counter and listen carefully to the response. Did you put contigencies in your offer that you could change? Finance. Inspection. Fast close.
I used http://www.bankofamerica.com/loansandhomes/index.cfm?template=hc_home_worth&statecheck=PA mixed with local board of revision taxes website. I just submitted my offer with no contigencies.
Just because someone beat you to the deal doesn't mean they will make out like gangbusters. And just because it was across the street doesn't mean it was intended for you. It could be that these people will be paying near the full market value after they are finished. They may want to hold it and let equity build over years, or rent it to offset their costs, or to help with the mortgage/loans. It may not have been such a sweet deal after all.
--Just a thought.