Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Rehabbing & House Flipping
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 8 years ago on . Most recent reply

User Stats

124
Posts
95
Votes
Michael R.
  • Investor
  • Cary, IL
95
Votes |
124
Posts

What would you do based on these comps???

Michael R.
  • Investor
  • Cary, IL
Posted

I finally closed my first seller-financed deal last week in a great neighborhood.  The home is a 3 bed 1.5 bath tri-level w/ 1350 sqft and a 1 car garage built in 1960.  It took 2.5 months of back and forth negotiations with the seller to finally land on a 5 year term at 6% on a 20 year am for $78,000.  I would hold and rent it out, but the taxes will double after all of the senior exemptions fall off and put an end to, what would actually be, great cash flow.

The market I'm in has been on the rise for some time now and all the schools are 8/10.  I did a considerable amount of digging over the past few months while we worked on this deal and found comps that are both reassuring and confusing at the same time.  

It seems that the sale price difference between the comps that were outdated and the ones that were fully rehabbed is around 10-15k.  Sure they sold about a month or two quicker, but my holding costs are only around $800/month.  

Below are some photos of the home I purchased and some links to the comps listed below; all within a mile of mine.  

The roof and HVAC were replaced 3-5 years ago.  The exterior paint and siding are in great shape as well.

https://www.redfin.com/IL/Crystal-Lake/201-Sunset-...

https://www.redfin.com/IL/Crystal-Lake/100-N-Cryst...

https://www.redfin.com/IL/Crystal-Lake/51-Erick-St...

https://www.redfin.com/IL/Crystal-Lake/934-Notting...

-Does it make sense to do some minor things like paint, carpet, appliances, vanities, and switch the fuses for breakers before just putting it back on the market?

-Is there even a good case for doing a full update, opening up walls, and rearranging things?  It seems like I would spend 20k to make 15. 

Any advice would be greatly appreciated!

Most Popular Reply

User Stats

1,750
Posts
879
Votes
Matt Motil
  • Rental Property Investor
  • Cleveland, OH
879
Votes |
1,750
Posts
Matt Motil
  • Rental Property Investor
  • Cleveland, OH
Replied

When I wholetail a property I make my decisions based on business decisions - what is the ROI of you doing something? If you are not on top of the market, it helps to have a real estate agent that can help you with solid comps and numbers. You need to start with an as-is value. What is it currently worth on the market with zero work and effort on your part? This is your benchmark. If you sold it today, you'd get $X for it.

Now figure out what it would take to get it to the top of the market. How much rehab would be needed? What would that cost? Factor in your holding costs into the calculation of costs to make sure you have the whole picture. Once you have the rehab costs, you can figure out the difference between the rehab costs and the additional resale value. If you can invest 20k and seller for 25k more then you make an additional 5k for putting in the work. 5/20 would be a 25% ROI, but you're getting the money back when you sell, so it's really 25/20, which is 125%. Either way you slice it, it makes sense to do the work.

This is a simple example, but you need to look at all the little things. If you went in and cleaned it up, put fresh carpet and paint down and then walked away and sold it, how would that play out? As long as the return is there, then it makes sense to do it (if you have the money to invest).

Another option to consider, if you have a contractor you have a good relationship with, would be to partner with them to do the work. You can agree to pay them at closing for a premium and fee. Ask them for their estimate. Offer to pay them their estimate and then a percentage of the profit on the back end. Doesn't need to be huge, but large enough to entice them to wait to get paid until the place closes. 

Hope that helps. 

Loading replies...