Bergen County, NJ · Member since 2016 · 11 posts · 0 votes
I'm considering purchasing a SFR from a wholesaler. These numbers make sense to me but would like to get your thoughts:
1. Purchase price: $550,000 for existing ~2,000 sq. ft. 4 br, 2 bath house on flat, 14,000 sq. ft. lot in quiet cul-de-sac;
2. Rehab costs to expand the first floor and second floor (add-a-level) should be between $200K-$250K (total of ~3,000 sq. ft.); and
3. ARV = $900K based on a similar after-rehabbed house that just sold two doors down (also ~3,000 sq. ft.).
Caveats:
1. For some reason, the high end inventory in Glen Rock doesn’t seem to be moving well, notwithstanding the house two doors down received multiple offers.
2. The rehab will take at least a few months so I'm cautious that the market may turn by that time and we'd be in the off-peak season.
Thanks in advance for any thoughts on any additional considerations or whether I should take up this project.
Investor · Basking Ridge, NJ · Member since 2016 · 71 posts · 33 votes
7y
Hi Soo,
Before you moved ahead I would look into why comps aren’t selling and why the one next to you did. Pick up the phone and ask the seller what people said when they say the place that made them put in so many offers. I’ve found people are really happy to help.
Only after knowing why some aren’t selling and the one close to you is can you really estimate how difficulty it will be to sell. And selling anything during the winter months in Jersey always has its challenges.
Investor · Cresskill NJ/Pigeon Forge, TN · Member since 2014 · 83 posts · 41 votes
7y
Are you calculating in holding and transaction fees? Just giving the numbers you are providing it seems the profits are pretty thin and that makes it more risky.
Realtor · Rutherford, NJ · Member since 2016 · 51 posts · 46 votes
7y
I too think the profit margin is too thin. Are you also taking into account realtor fees? Unless you are doing FSBO that one will be a big one as well.
Real Estate Investor · Maplewood, NJ · Member since 2017 · 127 posts · 47 votes
7y
@Soo Y. Your profits are looking really thin. One thing goes wrong and you'll be losing money. Doing a rehab like the one you mentioned requires a lot of permits. The town could take weeks to process your permits, then you need to have your inspections and get the CO. I'm sure you'll also need an architect and engineer for the scope of work you have planned. All this just adds to the cost and timeline. I hope you factored that into your evaluations.
Have you looked into different options? Can you subdivide the land and build two homes to sell?
Montvale, NJ · Member since 2017 · 38 posts · 24 votes
7y
Agreed. I’m active in Bergen County, especially in Ridgewood. The property taxes are usually too high for a buy and hold investor. I’m about to do a rehab in Ridgewood and the median price there is 707,000, location is vitally important.
Let me know what you are looking for and I can send some properties your way