CAN'T SEE THE INSIDE FOR REHAB ESTIMATION... WHAT NOW?

Question

Hi, BP,I found a property in a pretty rough/up and coming area in Tampa that I need help with. I have estimated ARV as roughly around 185K. I am unable to view the inside of the home, so I have no clue what rehab costs may be. I am thinking if the rehab costs are at most 100K, I can comfortably have a MAO of 55K. Of course, I would start negotiation around 45K or so.If any of you can help to guesstimate what's the worst possible amount to spend on rehab, OR if you can tell me what you've done in situations like this, OR tell me if I'm way off, please leave a comment below. Thank you guys!Amber

Jim K. · Answer

@Amber H.This really sounds like a bad first deal. Walk away. There are too many things that can go wrong here. If you had five or six renovations under your belt and some valuable personal rehab experience, you could jump on this deal, but the more you look at it, the more it appears to be a soul-crushing nightmare waiting to happen for a beginner investor. This is your first concrete ARV, your first rehab, your first everything, and you'll be going in without knowing anything? This is LITERALLY the blind leading the blind.Not worth it.

Alex P. · Answer

Hey Amber, I buy these types of properties. It's really not that bad, you just need to budget for a gut rehab +10% for unknowns. If the foundation is in good integrity and the house isn't tilting I buy it. How did you come up with your rehab estimate?

Ray Johnson · Answer

@Amber H. This is going to be determined by what type of investor you are. There are a lot of gamblers and high-risk investors that would lowball the price and then price for a worst case scenario for the interior of a certain square footage and planned use. I personally wouldn't do the deal if I can't do it my way which is knowing exactly what I'm paying for in a property.

Matthew Paul · Answer

I have bought 2 houses like that , I looked at the outside and thats it . I just figured it was a hoarder house and a complete gut and made my offer . The first was a total gut , nothing to save inside at all . The second was a nice suprise , a little trash , everything worked and a cold 12 pack of beer was still in the refrigerator .

Brandon M. · Answer

@Amber H. - You have to just explain to the family member that you really need to see the outside. If you can't see the inside, you are going to have to assume the worst on a lot of the unknown variables of the inside. Someone of those have been mentioned above, plumbing, electrical, anything. Can you go (with the approval of the family member) and at least peek in any of the windows and walk the exterior of the property? I am local, if I can help in any way let me know.

Joe Villeneuve · Answer

I make all my offers before I see the inside of the house anyway, so this really doesn't matter to me. Make the offer based on the needed rehab being what you can do...and what that will cost you. Make sure the offer has a contingency that it is based on inspection and approval by the buyer or buyer's agent. Don't put any Earnest Money down.After you inspect the property, if the rehab will cost more than your estimate, withdraw your offer.It's the price the seller pays for not giving you access.

Dennis M. · Answer

Would you buy a a 40,000 $ used car with a big tarp draped over it so you can’t see the thing ? Crazy anybody would do such a thing to me

Van Blackman · Answer

@Amber H.Good morning!!This is a good question.You see seasoned investors purchasing homes at the auctions site-unseen ALL the time. However, I've always wondered myself: "How are they comfortably able to buy these things without seeing the inside?"On the property that you're looking to make an offer on, is it vacant? Can you drive by the home? Can you walk in the back yard and inspect the exterior? Can you peak through the windows to get a better "feel" for the interior condition? If you can answer "YES" to these questions, that could help significantly.Are there basements in Florida? If so, you're guestimating just got a whole lot more challenging. Potential foundation issues can usually be spotted from cracks in the exterior brick, but you'd really need to walk the house to see if you feel any sloping. If the home has a basement however, there are too many unknowns for me to buy site-unseen. Unless it was a hellofadeal, I'm not sure if I could do it.My suggestion is: DON'T BUY IT. There should be plenty more opportunities out there where you CAN get access to the property. Unless you have crazy experience and know exactly what to look for, I wouldn't do it.Hope that helps!

Joe Villeneuve · Answer

OK. Most important question that I didn't see asked.Why can't you see the inside of the house?

Derrick E. · Answer

So it has sat vacant for around 35 years? If that is the case I would offer lot value only. Actually, I would figure up how much it costs to tear it down and remove the debris, then subtract that from the lot value and that would be my offer. Minimize the risk as much as possible.