Estimating Rehab Costs

[Hannah Singer]

Hi all,

This is my first post on BP so not sure if I'm doing this right. Ha. I'm hoping to purchase my first investment property by the end of the year and am trying to learn as much as I can before I dive in. Everyday I try to find some properties to analyze and today I found this one (address below.) ARV is $225,000 at LEAST and it is going to auction at the end of Feb. My question is for a house in this condition what would be your estimate for rehab costs? I understand there is a range just wanted to get some other people's opinions. What purchase price would make this a good deal?

1428 Estate Rd, Memphis TN 38119

[Paul Schaefer]

@Hannah Singer, first of all, welcome to BP!  I myself am also in the beginning stages of my real estate journey & have learned a massive amount through the forums, podcast, & webinars.

Now to your question. From looking at the pictures of the house, it is basically down to the studs & needs a complete rehab. Admittedly I have little experience in looking at houses like this, but what I have seen for a house this size, a complete rehab could be upwards of around $90k depending on finishes. With not being able to view the property in person & only having pictures, I would probably up the estimate for rehab costs. If you use the 70% rule (not the only method for determining purchase price), based on your estimated ARV, a purchase price in the $60k range would be a decent target.

Another thing to think about is typically at courthouse step auctions, I believe you have to have all cash to make the purchase.

Whatever you decide to do, best of luck to you!