*Need Help* Potential First Deal

[Ali Kassam]

My Girlfriend and I went to buy a bed from someone and it turned out that the guy was selling the bed on behalf of his parents.  His elder mom passed away and his dad was moving in with his son.  I asked if he would have an interest in selling the home and he said he was going to get speak to an agent first.  I told him I'd make him a cash offer in the next 48 hours.  

The home is a 1,478 sq foot brick Rambler built in 1954 and is located in Falls Church, VA. It is 4 bed 2 bath with an (ugly) furnished basement. I have 6 comps for the house. 3 of them are of similar size and all sold around 550k and were under contract in less than 30 days. There are also 2 larger 3 level homes that sold for 800k, both under contract in less than 45 days. If you know anything about the Arlington area, everyone is adding levels to make their homes bigger.

Link to video of the house

Link to Similar Comp

Comp with added level

Questions:

1. How much should I expect in renovations?  Is 75k to renovate it as is or 150k to add a level too much?  

2. Based on experience, what would be a good offer?  I'm thinking 425k is the max I could offer.  

[Jonny Phillips]

@Jan H. is spot on. I'll try to elaborate somewhat

If this is your first flip or you are newer, stick to the comps that will be most easy for you to rehab up to. So, I would establish the ARV more around that 550k mark. Then, for rehab estimates, buddy up with a couple contractors who are investor friendly (meaning, they'll do it for a little less but get more volume of deals. They will also be aware of what is needed to get a house up to the neighborhood and not go over the top with unnecessary work). Walk the property with them and figure out the estimate. In SD, at least with a 550 ARV, Here's some average numbers to give you a feel for this price range.

550k ARV

50k rehab work to get it there

375k purchase price. 

with closing costs, that'd get you roughly a 15-17% return. But you need to get your rehab estimate nailed down and find a project profit either % or $ amount that you're shooting for.

hope this helps