Help! Potential Redevelopment/Rehab Opportunity in Minnesota.

[Matt Lennander]

Hey All,

So I was out for a run the other day when I passed a house FSBO that I've passed probably more then a dozen times but finally decided to call. It's an estate sale, and the seller was very short with me on the phone but here's the info he sent me:

Estate sale - House + lot with potential to be subdivided (could profit from subdividing and selling the land)

Looks like a single family home, I'd guess 2-3 beds/1-2 bath. 

1.33 Acres (57, 935 Sq Ft)

Asking $250k

The "county listed it at $238k"

Conventional financing only.

Description on flyer: "beautiful lot with large trees, quiet neighborhood, newer larger homes in the area. House built in 1940, 1,318 sq ft living area. Detached garage. Lot size 57,935 sq ft with potential to be subdivided. House needs major rehabilitation work." 

The outside of the house does look pretty rough but the property looks well maintained. How big is a typical lot size?

I live right across the street in some apartments and the area is little to no crime, convenient access to freeways and major roads. I love my area and want to stay close. He didn't have pictures of inside the house and didn't answer any of the questions I asked, just sent the flyer. I'm totally green and haven't bought a property yet but $238k sounds really high for a house that needs major rehab even with the extra land, although it's prime area being very close to downtown. There are 1-2 newer houses right next door, other than that there aren't many new houses in the area.

Can anyone chime in here and tell me what you think it's worth based on what little info I have or what "major rehab" costs range from? I'd guess $50k on up... Maybe someone in the area would be interested in partnering/investing? I'm still learning, and would love to have a partner in a deal to show me the ropes. Thanks in advance for any insight you can provide!

[Michael Seeker]

Hey @Matt Lennander, what does a typical house fully remodeled in the area sell for?  This really seems like two separate opportunities:

1. Rehab house and resell - need to determine rehab costs and ARV. I would assume at least $50K for rehab, but you can only get a placeholder without walking through the property and accounting for everything

2. Split the land and sell/develop into additional lots - The value here would depend on what it costs to split the land up AND get appropriate utilities to it.  Not sure what this would entail, but assume you would need to make the lots buildable to be able to add any value here.  Lot size can vary pretty greatly...I'd say .25 acres is a good sized lot so you've potentially got 5 good sized lots.  Again, you'd need to research what these are worth to the end buyer and what it takes to get them buildable and find a buyer.

There are a lot of variables here.  My initial reaction is that this is not something for a newbie to tackle - you might want to start out with something a little more straight forward.