Rehab Question - What to offer & how much to fix?

Question

I have found a 2 Unit / 2 story 3,000 sf - probate property that needs major rehab..The seller is asking 85,000 - NEED INFO ASAP to make offer!!!

I am trying to figure on costs of rehab as well as what to offer on home - ( I would reside in Home there after as owner occupant ) it needs the following from what i can see.. x2 for two floors/ apts

- 43 replacement windows
- 43 Square of Roof
- a Rather Large Tree Limbs Hanging over roof cut
- 4 Exterior Doors with storm doors
- 6 Exterior doors with no storm doors
- Raise Porch Rails to code ( another ft or so ) Porch in front is 50 ft & rear Porches 30 ft
- Fix Front wooden stairs @ 5-6 ft wide
- Fix Water entering basement thru Bull Ked ( add a drain or pour concrete )
- Pour Concrete in Three car garage floor ( is dirt now )
- Needs Heating & Hot water, and baseboard heat up two floors ( two new furnaces and FHW baseboard brought up two stories )
- Electrical service upgrade from 60 amps old knob and tub to breakers and also bring up two floors adding new elec service in whole building adding plugs in all rooms plus washer and dryer hookups - 2 Panels, and move it to outside from basement..
- New sub floors in Kitchens where needed ,  and then Linoleum floors in kitchen
- Total Cleanout 3-4 Roll Off Dumpsters for left behind junk
- Linoleum in pantry 4x8
- 2 Bathrooms  - Needs new linoleum and 1 needs Sub floor
- Bathroom walls  - rip off old plastic tile in one and make drywall and paint - Ba 2 Needs Rip off wall paper and skim and paint
2 - Living room Kitchen & (2) Dining Room and 3 (6)Bed rooms Refinish Hardwood floors on ea floor so x2
2- Living rooms, kitchen and dining rooms, remove wall paper and skim coat, and paint all walls and ceilings
2 - Living Rooms and windows remove all trim and replace with new and paint ( lead Paint )
2 - Repair Bathroom Ceilings and Pantry Ceilings and then paint
6 Bedrooms Fix Drywall, paint walls and ceilings
2 Bathrooms install bathtub wall panels
2 - Install Kitchen Cabinets , and countertops, and Sink in both pantrys
2- Install Dishwashers including pipe, drains and elec in two pantries
2 - Over stove - More cabinets in Kitchen @ 6 ft top and bottom with countertops
2 Install washer and dryer hookups after bringing power to location
Approx 150-200 ft of Asbestos removal in basement

also what is the lead time to do all this..?
Please help with Estimate of Price to acomplish all this..?

The house in this market would be 135-140k - what would you offer as residence or two rent and hold..
How did you arrive at this..? Thanks to all in advance..

Account Closed · Answer

Have you pulled recent comps from the last 3  months that show the value is in the $135k ballpark?  As an investor you should be buying this property for $40k.  If you don't buy it, then who will? Someone will be facing the same rehab expense.  With all the rehab needed plus the price the seller is asking, it's better off buying property that needs less work, you will come off a cheaper and save time.  You have to ask yourself if you want to invest to make money, want somewhere to live or just want a an expensive "project" to feel good about the outcome?    Keep us updated on what you do.

James H. · Answer

I forgot to mention, the only reason I would consider this deal is because you want to live there yourself and you will have another half to rent out. If you really like the place, it could give you a nice equity position later on, but its not going to make you wealthy.

Strictly as an investment, it appears to be more trouble than its worth.

Brad P. · Answer

With some very, very rough analysis, this one doesn't look like a deal to me.

I didn't do a take off but let's just assume your rehab costs will be $40,000 (although it could be more work than that off the cuff).

Holding Costs (utilities, insurance, loan payments, etc.) assumed at $600/mo) @ 6 months = $3,600

Fixed Costs (inspections, permits, purchase closing costs, property taxes, realtor fees, buyer's closing costs) = $20,000

Renovation Costs = $25,000

$135,000 ARV
-$3,600 holding costs
-$20,000 fixed costs
-$40,000 renovation costs
=$71,400 Max purchase price

So unless there is a bunch of room to negotiate the $85,000 purchase price, you aren't even in the ballpark.

*Note:  These numbers are just semi-educated guesses.  You should know them exactly before you make an offer.

J Scott · Answer

Now that you have a scope of work, why not just get a few contractors to bid the work.

Pricing is going to depend greatly on the level of finishes and where you are located (labor prices vary a good bit), but if I were going to do that work where I live, I would expect somewhere in the $60-80K range based on the information you've provided.

Phil Tsouridis · Answer

The homeowners said they had an offer for 60k, knowing the possibility of getting the extra land in back which would pprobably be approved for another lot in back to build on i went 62k, in which they countered at 70k.. I declined, and really didnt wat to go over 40-45k thats is pushing it.. to make any kind of equity when finished in this market.. Lower then that would have been better.. Its a Probate property so all invloved have to agree.. Guess ill let them sit on it over the winter when the pipes break, then maybe i could get it for land value of 40-45k..

Eric M. · Answer

Anyone can buy a $135K property for $115K with their eyes closed.  So you shouldn't be willing to pay more than $115K.
If the house is 140 years old and your rehab estimate is 80-90K, you are not getting it done for less than $100K.  Stuff WILL happen.  Dealing with the city on permits alone could be a very expensive and lengthy proposition with sealed drawings, etc.

So that means you are offering less than $15K for the property which , realistically, he won't acccept probably.  Move on.  There is MUCH better stuff available.

Phil Tsouridis · Answer

Raymond, No i havent - many tell me to stay away.. but im thinking a low ball offer to see what will happen.. maybe with cash.. but still havent determined what to offer.. the repairs for me to move in would probably be 80-90k

Raymond B. · Answer

Hello Phil,
Did you decide what to do with this property?

Thank you,
Raymond

James H. · Answer

Depending on your expertise in construction, I would consider taking the contractor bids and adding 20 percent. You need to get that asbestos price and shop around because I bet the prices will be all over the place. But asbestos disposal can be pretty expensive. It still might not be a deal breaker. Is there some way you can work around the asbestos and leave it there? As long as its not in particulate form, its not a problem and will last forever. A lot of people just cover it up.

Once you have your rehab costed out, you need to look at rent prices for the neighborhood. From there you can figure your profit potential. Search for 50 perecent rule in the forums to get an idea of how to do that quick and dirty with some conservativism. Then you need to look at the life cycle of how this investment will play out in the long run should you sell it in 5, 10, 15 or so years and see what each point looks like. You need to know how long you are going to be locked in before you see profit and if you are comfortable with that. I always consider teh oppertunity costs as well. This would include what if I just invested my money in stalks at 5 percent interest (average) over the same time span (5, 10, 15 years etc.)

Anticipated rent is very crucial to determining profitability.

Ed O. · Answer

If the ARV is 135:

and you put 70 into it, you would be doing the seller a favor to pay $65k for it. Due to the amount of resources this project will take, I doubt the pool of buyers is big. Have you completed a project like this? Do you have the funding and reserves to pull it off? If you have not done a handful of major renovations, I would caution you against pursuing this deal. Repair estimates are almost always under estimated. I would add 10-20% to your repair costs as a buffer. You won't know the extent of some damage until the walls are open, etc.

Have you factored in your carrying costs while the massive rehab is under repair? Utilities? Taxes? It sounds like you have experience working on homes, but this one sounds like a big place that has been deferring maintenance for 30 years. I agree with your # on windows - 20k sounds high, unless you're putting top of the line windows in a rental, which is a total waste.

I'd look around for lower hanging fruit myself, (a place in much better condition, needing a lot less work for around the same price) unless you could get the place for a substantial discount, which, like I said, it appears you're not. It sounds like the seller is unrealistic. Time on the market will change that, as will the winter months.

Rehab Question - What to offer & how much to fix?

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