148K profit on 4266 Washington Blvd, Saint Louis, MO 63108?

Question

I have been researching properties for potential fix and flips and I came across this property...and I wanted to get some thoughts.

There was a fire that severely damaged the building and now the price is listed at 129K for 7 beds and 3 baths and 3,075 sq ft ($41.95/sq ft).  This property is down the street, and is selling for $415K, has 6 beds and 4 baths, and 3,380 sq ft ($122.78/sq ft).

If the fire-damaged property was rehabbed and the price per square foot was the same as the reference house, it would be worth $377,548 (3,075 * $122.78).

If it cost $100,000 to fix the house, that would put the all-in cost at $229,000, and if the 70% rule is applied, then the max list price is $264,284 ($377,548 * .70).

So, in the end, sells for $377,548, money in was $229,000, which is about $148,548 profit.

Does this make sense? The profit seems too high to be right. Would it cost more than $100,000 to fix the house?  Are any of the calculations off? Other thoughts?

Will Fraser · Answer

Hi @Collin Emerson Miller, something seems off.  First, I suspect the rehab costs will be higher than $100k in light of 1. fire damage remediation and 2. having a kitchen and three bathrooms.

Second, you'll want to account for "costs of sale" and "costs of project" when thinking through potential profit.  It will cost you something to sell the home (think realtor commissions, title company fees, gov'ment cheese, etc) and it will cost you something to do the project (think holding costs, like the interest you'll pay on the loan while the project is happening)

So, when you think of selling for $377,548 (if indeed that is viable), you'll want to take something off the top, say 7.5% to represent all costs of sale?  This would leave you with . . . $349k, and then once you account for the holding costs you'll be looking at a more realistic profit projection.

You'll still need to work on the other side, too, and get a solid estimate of the rehab costs.

I hope this is useful to you!

Jason White · Answer

I'm a fire restoration contractor, without seeing the damages I can't be sure obviously, but $100k is going to be very low for a house that size. Especially, since you say it's severely damaged. At least here in SOCAL a house fire that size would be in the $300k range, even more, if the finishes are nice.

David Ounanian · Answer

@Collin Emerson Miller if it were just cosmetics I'd say you have a chance at pulling it off the rehab for $100k.  With all of that fire damage I would think you are going to be closer to $200k.

Mark Johnson · Answer

@Collin Emerson Miller I will add that I know an investor that has a similar type of property located not too far from you on the other side of Delmar (which is not doing nearly as well) that she uses as a rental.  This area is located next to 2 major universities that both have medical schools. She rents out each room individually and says that it is by far her easiest rental to manage.

Mark Johnson · Answer

@Collin Emerson Miller. I live and work in St. Louis as a real estate agent and something does seem off with that deal.

I haven’t seen inside of it but $100K in renovations for a fire damaged building seems low. The houses in those neighborhoods are pretty old and the rehab on non-fire damages property would be upwards of $100K depending on the scope of work.

However, the ARV is the biggest issue. The comp you’re using is the list price for a For Sale By Owner that has been sitting there for 20 days. You really need to know your stuff when looking at comps in that neighborhood.

I actually went to college at SLU right around the corner from there and know the area very well.  Feel free to reach out with any additional questions. I’d be glad to help!

Sam Shueh · Answer

Need to itemize the repair, roof, structure, electric rewire will easily cost you 100K assuming only kitchen ignited. If it originated from garage and home inside was affected may be 50K.  As for remodeling $50/sf x 3000+ or so is more like the actual replacement .... Permit, carrying cost interest from the rehab loan.

This is St Louis, MO not far from downtown. How safe is the neighborhood?  Who do you want to target wanting 7 br house?  Most people I know fled to suburb to avoid being in an older neighborhood.

148K profit on 4266 Washington Blvd, Saint Louis, MO 63108?

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