Good deal or bad deal?

Question

Hey all,

I'm new to rei so I need some advice. Looking at a house in PA, owner is free and clear on the home. Been vacant for 4+ years, no utilities on and he started renovations. Tore out some of the walls, the kitchen, a bathroom and some ceilings. The walls are plaster so its a complete tear out and rebuild. The home is a 1260 sqft cape cod with 3 bed 2 bath.

ARV is $140K, owner wants $50K and wants me to pay his closing costs. My thought is he just wants too much for the amount of repairs that need done for me to make a profit even if I was going to do the work myself. Which I wouldn't. Actually wanted to buy it to wholesale it to another investor for about $5K.

Owner will not take less than $50k and will not sign the deal unless I pay his closing costs.

My offer on the house was $30K and expected him to pay his own closing costs. And that is what I feel the property is worth. He keeps threatening to walk away if I don't agree to HIS terms.

Keeps telling me "I will just hold onto the property and fix it up myself". "I'm retired and have all the free time in the world".

Here is what I think... If he was going to do the work himself or fix it up he would have done it by now. He should pay his own closing costs, and the property is worth at most $30K. The house needs everything except windows which are new.

First thought was to tell him no deal and walk away. After all, he called me immediately after I sent him a we buy houses letter.

The best number I can seem to estimate in repairs is $65K.I know at that price $50K is a non starter.

So the question How much should it cost to totally rehab a 1260sqft brick home with good bones?

Is it a good deal at $50K?

Should I agree to pay HIS closing costs?

Personally I think its a suck deal and he thinks im a sucker.

Am I right? or not?

James Martin · Answer

I did not see anything about a roof or electrical in his first post.If you shop at your Big Box companies material will cost you, I dont! In memphis we have shops that buy blind trailers material and wholesale it at half of retail price to contractors.Again, I dont pay those premium prices for roofing or electrical.I work with a real time line, and a crew that works for me by the hour and not job. This allows me to cut and control cost.Lastly, I thought this was going to be a rental not a HOMES on HOMES flip.

Keith Saunders · Answer

If I was buying for myself I could see the benefit of adding all the green stuff. But for a flip???? It will cost me twice as much to do the repairs, which will eat up my profit. As I see it the end buyer is the one to benefit from all those costly upgrades.

Just my opinion.

Keith Saunders · Answer

Damn... if you can get all that done for the price you say. I'll buy the house, drive to tennessee buy all the materials and bring back some good ol boys to do the labor. LOL

Its going to cost me $8k for the kitchen alone. Better yet I'll buy it and wholesale it to you...hehehe

Stu Holbrook · Answer

All new electrical to code, roof, bathrooms, finish work inside and out with added landscaping and walk way, and this is the short list.If you buy this please do it right and go green with 21st century technology - use passive and active solar when construction occurs, use every energy saving option available perhaps add a solarium or greenhouse while your at it. In the end you should find a buyer for the best house on the market. The house will cost less in energy year round.

Rusty Thompson · Answer

10k is a rediculous #. I did a facelift, and moved a bathroom & it cost me 10k with most of the labor coming from me. I would think 30k is a closer estimate if you are really careful with material choices. I don't know if you will needed licenses electricians and plumbers in your are but that will def. increase costs a lot.
Also keep in mind that you will have to pull permits for the work & that can push your time table out of wack.

But it seems to me that what he want is not unreasonable. if you bought it at 50, even with holding & closing costs you will have a very big margin for overages.

If you flipped it & your comps are correct you could pull in a easy 50k

just my .02$

Jonathan Sher · Answer

8-10K? Did you read what he said needs to be done to the house?

New roof
Kitchen
2 Bathrooms
HVAC
New Electrical

James Martin · Answer

I would put it under contract and wholesale it fast! To renovate a 1200 sqft (1story) with good bones in my area is around $8,000 to $10,000 material and labor.

Stu Holbrook · Answer

Do you know a good local home builder, a general contractor that will take the project cradle to grave, or in this case grave to desirable? If so get an estimate, if not pass. Sounds to me that if you parcel the work out it will be expensive to get the work done. Also, are you in a hurry? If not wait a bit, if someone else buys good luck to them. On the other hand, if the current owner has not sold it by Thanksgiving, he could still sell for $30k and close in time for Christmas, you can also ask him then how the work is coming along. I don't mean to sound cruel but when the weather turns gray, the nights long and cold and the trees are bare - "all the time in the world" might give way to thoughts of mortality.

Keith Saunders · Answer

anyone?

Keith Saunders · Answer

sorry... meant to say wholesale it to an investor.