Investor said he spent $150,000 to rehab a house.

[Account Closed]

Me and my wife were on our way home when we decided to drop by an open house that we saw. The house had been rehabbed and was being sold for 260k and was built in the 1920s. I introduced myself as somebody who was just looking around, which I was since I wasn't really looking to buy. He was explaining how he rebuilt the house and showed us a couple of pictures before it had been renovated. It was really nice modern appliances, energy efficient, built in surround sound and a cozy fireplace, pretty much everything had been redone. Now, when I asked him how much it cost him to rehab the place, he said 90% of it had been rehabbed and it cost him $150,000. The house was pretty small (I would say about 970-1000sq ft?), had two floors. I'm curious, does it really cost that much to rehab a small house or was I being fed with deceit? If he was twisting the price, why would he?

The house looked like it could've been bought for 40,000-50,000. $90,000 tops (Which would be a horrible price for an old and worn out house in my opinion).

[Buddy LaRue]

If this is a flip, and he spent $150,000 on rehab, and he's trying to sell for $260,000.....Lets crunch some numbers.

Lets assume he paid $65,000 for the property (1/2 way between the $40K and $90K he could have purchased the property for), with 3% closing costs...he'd have paid $66,950 for the house, then put in $150,000 in rehab puts him at an all in of $216,950.

If he sold the house for $250,000, he'd be making a profit of $33,050, which would give him approximately 15% return on capital gain. Not great numbers, but a lot better than in a bank!

Could he have spent that much, yeah, but it sounds like he over-improved the property and may have a hard time selling a home for $250,000+ in a neighborhood where a house can be purchased for $40K to $90K. $152.28/sq ft in rehab cost is WAY too much.

What's that smell? I think it's something coming from a pipe, and it's causing the guy to really dream big! Either that or it's just regular BS!