ARV in North Jersey on a Unique Lot

[Max Mac Phail]

This is my first post and a quite long one at that. Thanks for reading and replying!

Originally, I found BP by trying to figure out how much a family member's house is worth fixed up and what an investor might offer. My thinking was an investor would be the buyer of the house. I have since learned about ARV and a few of the different formula's used to calculate an offer to the point where I built a spreadsheet about this property using these principles.

My questions about this property are:

• What is the ARV? Based on my assessment the ARV is about $450k, due to the lot size, privacy offered and increased functionality/high-end updates after the rehab.
• Is it possible to make a profit? Profits will be shared with owner after rehabbed house is sold. (65/35 me taking the larger portion)
• What are buyers looking for in a house that is move in ready in this market?
• How to fund the rehab without a bank? Owner has no access to credit, I may be able to qualify for a $80k remodel loan through a bank, but would rather not involve a bank.

I am trying to determine ARV and an offer price knowing the owner (family member) needs the cash. Currently there is about $170k outstanding against the house in a HELOC and property&IRS liens. The house has been on and off listed for almost 28 months with one offer that was accepted for $350k, however the buyer never signed the contract. That is another long story.

The house is distressed and the owner has equity, even with the aforementioned liens and HELOC mortgage. There is one major problem: the house is in a North Jersey flood area, but the house has never flooded...EVER. The really bad news is it was about the epicenter of Hurricane Sandy damage in North Jersey! The federal government is buying up houses in town due to the hurricane and repeated flooding over the past 3-5 years, hurting house values.

The house is looking at a costly, estimated at around $80K, 2-3 month rehab to get it on the market. It needs new floors, roof, windows, bathroom and kitchen updates, appliances. Several investors have looked at the house with no offers! What might be stopping the investor offers on the property?

With all the negatives of the house, there is one big positive, the lot is nearly 3/4 acre and there is 1 neighbor on about 1.15 acre lot. Even though the lot is large; developing is out of the question. A public access road and sewer line would have to be built with a design from the Army Corps of Engineers. The property is built up over 6ft and the 50ft driveway slopes at about a 12% decline from the road. Additionally, the land surrounding the property is a registered national historic site (more red tape to developing) with a recently paved walking path that is becoming popular for people exercising (no windows look out onto the path).

Inside is a 2200 sqft mother-daughter house with 3/1 on the first floor, however one of the BR's is quite small and best used as a study/office or a nursery. The downstairs has a 1/1 apartment with its own entrance, a useless garage (thanks to the builder) with a finished entertainment room.

Using the MLS, I have tried to run comps, but am having a hard time pricing the house due to the large variance in prices depending on what part of town they are in. Secondly the lot size is about double similar sized houses. The town itself is only 2.2 sq miles! Thanks New Jersey for having so many municipalities!

Thanks Again!

Max

[George C.]

Little Falls? I have some friends there. One has a house in the best part of town there, no where near the flood zone & they are barley getting $300K for a house that would've sold for $500K in 2005, a very nice colonial, extra deep lot, garage, fireplace... Anything near the flood zone is gonna be a rough sell at any price. My one friend lives outside the flood zone right on Main street & he got a foot of water in his newly done basement with Hurricane Irene the year before Sandy. It'll be a few years without floods before regular folks begin to forget all about the headaches & heartaches with flooding. Just living around that whole area is a horror show trying to get around when the main roads & highways are closed due to flooding, so everyone is effected by the flood, even if their house doesn't flood. I myself wouldn't be buying anything there to live in or to rent. I think it's way too soon to invest in that area in my opinion. Be careful...