Selling a rehab project...quickly

[Teren Cooley]

Hi everyone,

So I’m a pretty new investor and I just closed on a property that needs major renovations. Floors, drywall, electric, roof, maybe plumbing, but I’m no expert and can not evaluate these things myself. I do know that there is already a well and septic system and the cinder block foundation still looks to be in great shape. Also, most of the studs along with the stairs still look good. That’s about the extent of my observations.

I bought it because it’s on a nice piece of land near some waterfront and I got it for a ridiculously low price and it just struck me as a no brainer. I’m concerned about cash flow right now and wanna sell this thing ASAP so I can move on to some other deals I’ve got.

How would you guys suggest moving forward? I don’t wanna invest any more at this point unless some inspections are completely necessary. I know the profit margin is there basically no matter what, but obviously I wanna get as much as I can for it. I’m thinking 75-85% I’d assessed. I’m already working on getting it up on the major channels (Zillow, fb, fl) but wanna be more proactive and line up a buyer soon. Thinking about calling builders and contractors but not really sure where to start there. Thanks in advance for your input!

[J Scott]

Sounds like you bought it without a plan...  Not the best strategy...

First step (at this point) is to figure out what the highest and best use of the property is.  Rehab?  Rental?  Tear-down?

Next step is to figure out what it's worth.  You said 75-85%...but 75-85% of what?  And how did you come up with that number?  Valuating a rehab is going to be different than valuating a rental which is going to be different than evaluating a development deal.  Go back to the highest and best use and figure out a value based on that.

Once you have a highest and best use, you know who your end-buyer will be (in general).  Whether it will be a flipper, landlord, developer, etc.  And once you know the value of the property, you know what you can sell it for.  Start reaching out to those end-buyers through whatever channel is best to reach them and let them know you're selling the property for $X.

Next time, figure out these things BEFORE you purchase...  You may find that the property isn't as good a deal as you thought.