Potential First Investment

[Matt Cyr]

Hello, this is my first post. I am a total newb to the REI game. I'm seeking some sort of opinion on a potential investment property. I realize this is the internet and any advice is to be taken with a grain of salt, but after going through the site for awhile this seems like a good place to ask.

That said, I have been looking at a 3 br 2 bath house in Hartford county Connecticut. It is currently listed at 219900. The house is in pretty bad shape right now. From looking at the outside, it looks like it will need a new roof at the least (there is moss or something growing up there). If that is any indication, I can only imagine what other work would need to be done.

I have lived in the area where this house is located all my life (35 years). It is in a great neighborhood, less than 2 miles from excellent public schools that I attended years ago, shopping, highway access, etc. It is in a wonderful town to raise a family. If I had a family and was looking for a house for personal use, I would jump on this one and spend the money to fix it up.

From what I can tell, other houses on the street have been selling for 275-300k in the past year.

If I were to make a go at this, I would potentially have my parents and another relative who could lend some support/partner with.

My main question is, if you were to buy something for 215k, with potential sale price of 300k (I'm rough estimating 30-50k rehab) would this be worth the time and effort? To me it seems like it could turn into a decent return, but being a newb I can see the starting and end points, but the details of getting there are a bit fuzzy.

[Glenn Espinosa]

Rough estimate:

$275k x 70% = $192.5k
$192.5k - $50k (repairs) - $142.5k

Using the 70% rule of thumb, you would need to buy this house at no more than $142.5k in order to have a reasonable chance at a profit.

Think about it, just selling this house will cost 6% realtor fees. At a $275k selling point thats $16k+. After rehabbing for $50k and accounting for realtor fees you're already in the negative if you buy at $215k. That doesn't include financing fees, utilities, insurance, holding costs, marketing costs, etc.

BTW, I'm using $275k as my ARV just to be conservative. The numbers still don't look good at a $300k selling point, however.