Rehab or Sell

[Nicole S.]

I've been analyzing this darn property for months now and I just don't know what to do with it. My family owns it free and clear and we currently rent it for $1,200 a month, which is a steal in the Seattle market place. 

It's never been updated and needs about $20K worth of foundation/structural work. It's looking tired inside and has knob and tube wiring, asbestos lined heat ducts (gravity heat), original plumbing, it needs a new roof and windows soon and some siding work and a paint job. Not to mention all of the cosmetic work, etc. 

Built in 1919, it has about 1,200 livable SF but if it were re-habbed closer to 2,700. 

If we sold today, I predict we'd get between $350K and $450K as-is. Estimate to re-hab is $300K, estimate to tear down is $600K. 

It's possible I could get $850-$900K when done. 

Should I sell as-is, rehab and sell, rent as-is, rehab and re-rent? I look at the comps and they're all over in this neighborhood - this home also sits on an arterial. 

Thanks for any help - I'd be curious to know what others would do in the same situation. 

[Billy Au-Yeung]

In this scenario, i assume you are able to sell at $850K just to be conservative.

If you sell it as is, you are already making $400K already out of the gate just doing nothing.  (350-450..i use 400 as an example)

If you want to do a rehab for $300K and sell if for $850K, then your profit is $550K ( the marginal profit is $150K for your hard work)

If you tear down and build for $600K then your profit is 250K (you are actually making the less profit here but you are doing all hard work)

Compare the marginal profit

400K vs 150K vs negative150K

I may rehab it if I were you.  $150K extra profit sounds good to me.