Anyone touching these types of homes?

[Jay Shindledecker]

https://www.realtor.com/reales...

The eyesore of the neighborhood, surrounded by $1M+ homes...

Does anyone here do extensive renovations on properties like this one?

[Ke Nan Wang]

To do a flip, simply stick to the formula Earning = ARV - closing cost - loan cost - acquisition cost - renovation cost - opportunity cost (optional). Is the Earning worth it to you?

Renovation cost and ARV are the tough part. If you are new to flipping, the good rule of thumb is whatever your renovation estimate is, multiply it by 2 and that's your real number. No matter what the contractor is telling you. Experience so far told me that's 100% the case for newbies.

Now let's talk about ARV. My suggestion is to look at the best comp in the area, and see what would it cost to renovating it to match the best comp.

If the comp in the area are modern post 2010 houses and you have a 1955 floor plan, don't fall for the trap like I did and put a lipstick fix on a old house (I upgraded everything, plumbing, electrical and HVAC, new roof and a complete make over). The problem was that it's a old floor plan, it didn't flow well and the bedrooms are inherently smaller and ceilings are inherently lower. The exterior has the 1955 look (even I repainted, replaced windows and doors, install new gutters). My house did not match the comps in the neighborhood. On paper, my bedroom numbers, bathroom numbers, conditioned square footage and finishes match the comp houses, but the floor plan and style didn't, I couldn't sell for the number I wanted price per square footage wise and the feedback from buyer's agents shown. 

To have a high confidence calculation, you need to calculate what's the reno cost for you to bring the property to match the comp. If multiple comps have 2 car garages and yours is a carport, what's the cost to convert/add a two car garage. If multiple comps have 13x14 master bedrooms with en-suit bathroom and a walk-in closet, your master bed is 11x12 with a 3x6 closet, what's the cost to convert it to match the comp? Forcing a floor plan is not good. If the cost is too high, then you need to make a decision to not take the deal, or anticipate that you will take a hit on sales price (maybe 20% of the highest sold comp in the area), or just have a long term hold plan for the appreciation play. 

If the above scenario does not apply, you think you can do light reno to match the highest sold comp in the area, then you should have a good ARV then focus on dial down in your reno cost and negotiate a good deal to enter.

At the end of the day, the number should tell you whether the juice is worth the squeeze.