my name is Brett I am still new but have a great mentor to follow. He owns a demolition company and had this deal come to him that needed to be demolished. Location is in Boise,id 950sqft 2bed 1 bath home with a half acre lot valued at $150,000 it is being purchased for $120,000. I offered 100,000 which includes my $20,000 budget to fix and rent it. The demo man is lending me the 100,000 at 5% with a 5 year payoff. KICKER there is a mother in laws house behind the main house that can be turned into a rental as well has electricity, needs plumbing potential 1 bed 1 bath. As well lot has room to add a future smaller home. I think I am going to do the deal, need a 2nd opinion I did the calculator but not sure if i calculated it right with having a 20,000 budget.
Let me understand this correctly. The house needs to be demolished. But, you want to buy and rehab the place for $100,000 ($80K purchase/$20K Rehab). Who is doing the $120,000 purchase? Or are you doing the purchase for $100K loan from Demo guy) and using $20,000 of your cash for the Rehab?
Anyway here's a few questions:
Did you get comps to justify the $150,000 purchase price?
What are you basing your Rehab estimate on? Did you walk the property? Did you have it inspected? Why was the house being demolished?
Have you checked with county zoning laws to see if Multi-family units (Mother-in-law house and future 3rd house) are ok?
Have you conducted a Rental Market analysis to determine the going rates for similar properties? If so, have you completed a Cash Flow analysis?
Last question.....Have you thought about your exit strategy to get out of the initial loan?
Thank you for your response the house was deemed uninhabitable by 4 real-estate agents, which I'm sure they looked around the house and do to the outside condition said it needs to be torn down. They did comp the home around 150,000, our assessors office valuation is 153,000 minus the Mother-in-law house. So the demo guy took a look at it, as well as myself and believe it can be rehabbed, it has good structure or bones to start fresh with new updates. New roof 2013, new HVAC, and water heater.
Muliti-family units in this area are common and most of the neighbors will subdivide the lots.