Please help me stress test this potential BRRRR deal

[Brad Johnson]

Found a 3BD/3BA 3200sqft cabin on 2+ acres in great condition, but in foreclosure and owned by Fannie Mae. It went to aution of course, and I have no idea what the bank is in the property for. It is listed for around $500k and the tax records show it being valued around $450k. 

It has an unfinished basement with around 2200 extra sqft to be added, which can/should include a few bedrooms and maybe a bathroom. The unfinished basement has electrical, studs up, insulation in walls/ceiling, etc. so it seems like it just needs drywall and flooring. Not sure if its plumbed. This is obviously the potential value add.

I researched the tax record codes and found the basement is counted at 20% of its sq footage in the tax value. If I change that percentage to 90% (which is what the finished second floor is counted at - the main floor is 100% so this may be conservative), the value add is about $150k. I have no experience finishing basements but I expect it to cost much less than this potential value add.

Am I thinking how to value this potential deal right? There are basically no comps to judge $/sqft in the area, but I will be looking to pay an appraiser in the area for help Monday, if I can find one.

[Nate Bell]

@Brad Johnson

I’d be careful here- if the house already has 3 bd/3ba, there might not be much value in adding a bunch more bedrooms, or even living space in general, in the basement. It’s not really a linear extrapolation from sq ft to $, especially in a basement.

You might consider converting the basement into a separate unit entirely, but this will be pretty costly and your time, $, energy might be better spent on another project.