All You Can Analyze Weekend: High Reno Cost, worth it?

[Amelie Cabral]

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Hi there,  

In contract for this SFH. A contractor I asked to give me a quote on the reno costs told me this was not a good deal. I am going to start negotiations today to try to get the seller from $84,000 down to $40,000.  If I am able to purchase for $40,000, now is this a good deal?  

Thanks,

Amelie

[Rene Owczarski]

@Amelie Cabral Well, probably time to call the listing agent, and get chatty with them about what you found in the inspection, and get more info about the sellers situation. Because if the seller has no distress to sell, and 4 yrs on the market is probably a hint that they're in no rush, you probably won't get a discount. But if you're not bringing a buyer's agent with you, you could always try to do a dual-agency for the listing agent, that way they get both sides of the commission, on a lower buy price.

Also, before you say you'll be happy to overpay on a house that's been sitting on the market for 4 years with no takers, lets take a second look at the numbers. Say you buy it at $84k and your rehab budget is $70K, that puts you at $154k before any holding costs (loan payments, taxes, insurance, utilities, etc.) on the property, and you're projecting an ARV of $160K. So if nothing goes wrong, you're OK maybe making $6k on this deal?

With a rehab that big, and the ARV you're projecting, you need to buy around $35k, for you to make any money on the exit, or have enough equity to refi the deal.