Good/Bad Deal?

Good/Bad Deal?

Investor · Phoenixville, PA · Member since 2008 · 257 posts · 18 votes

The house in question was built in 1972, is 3,800 sq/ft, has 3.5 bathrooms & 5 bedrooms (if you include the in-law/nanny suite connected to the main house). Zillow Zestimate is $530k with a range of $514k - $779 (which I know doesn't mean much). Since there aren't many comps, I'm leaning to the conservative side and saying that the house would sell for $425k.

The house is owned by the original owners and NOTHING has been upgraded since 1972! I would think that because of the ARV, that this would be more of an upscale rehab than what I'm used to. Most of the work that needs done:

1. carpeting needs replaced
2. interior and exterior needs painted (unless new siding is put on)
3. several large trees, bushes, and bamboo need removed (as well as other cosmetic landscaping)
4. sills are rotted around 15 windows and 2 small bay windows (new windows all around?)
5. 15' x 10' deck needs demo'ed and rebuilt
6. all bathrooms need remodeled
7. both kitchens need remodeled (main house & in-law)
8. one side of the roof over the in-law suite (25' x 30') needs rebuilt (the main support beams are bent and could collapse with a heavy snowfall, according to my in spector)
9. sliding glass door has some rot around edges and needs replaced

I have no idea what the rehab would cost, but the house is mine for $200k. Does this seem like a decent deal? how much profit could I expect from a deal like this? I'm just looking for a first-glance, ballpark take on this deal, as I realize that it's impossible to be precise without knowing all of the details.

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Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
Originally posted by Mark Beekman:
...
Steve, I want to thank you for your offerings of help, not just to me, but everyone here on BP. You're a good dude for spending the time helping out us newbs on here. It's very much appreciated.

Mark - you're quite welcome.

And I can still connect you to the rehabber investor who might just be willing to take this one, if you choose not to undertake the rehab.

See this reply in the discussion

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  • Real Estate Investor · Geneva, IL · Member since 2010 · 82 posts · 29 votes
    16y

    Seems like a real winner to me. I'll buy it if you don't want want it good luck. You may want to see if a Realtor can do a CMA for you just to be certain. Any Realtor will do it for free hoping to get the listing.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    16y

    i'd absolutely suggest finding good close comps...i have a property in a beautiful historic neighborhood where there are gorgeous 3 story 7 bedroom remodeled victorian homes selling for big money. just a few short blocks away is another part of this historic town, and the values drop quick....btw, my rental is in this 2nd area :wink:

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Judging from your repair list, looks like it would range between $40k and $50k for rehab. At $200 acquisition and $50k rehab and an expected exit at $425k, you have yourself a grandslam deal at 59% all-in.

    What area of the country is this? How is the market and current conditions? What is the average DOM. What is the ratio between equity sales and REO/Short pays? Knowing these items along with a validated exit price (via real sold comps within last 90 days) will substantiate this deal. Either way, you have lots of room for error in this deal. I would have locked it up yesterday if it were me in my area.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    16y

    will, you think 50,000?? that comes out to about 13 bucks a sq ft. this is a huge house that hasn't been updated since the 70's, with 3.5 baths and 2 kitchens. hey, you could be right though....it'd be a great idea to meet a few GC's out there, especially if you haven't flipped a lot. personally, i don't rehab homes of that size (although someday i might wanna--that's just not what's selling here right now) so i would triple check everything for myself. in a 1,200 sq ft house, there's always things that pop up and ruin the budget...multiply that by 3 for this house, and you see this could be an expensive project. i'm not saying it's not doable though..it sounds like there may be a great profit spread here if the house is as valuable as it sounds so far.

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    You are right Bryan, I missed the "two" kitchens and now that I looked it over more closely, I also missed the decking and the fact that ths home is 3800 sq. ft.
    Time to get off the computer, I must be too tired.

    I have done a 3800 sq. ft home, but without 2 kitchen remodels and was able to keep the rehab lower, but it was much more updated and newer than this subject property.

    Considering the size, it could easily be $100k. So $300k all-in with $525 exit is still 70.5% which is a homerun in todays market. If the rehab is more than $125k, be carefull!

  • Investor · Phoenixville, PA · Member since 2008 · 257 posts · 18 votes
    16y

    I have a realtor working on the CMA. We'll see what that turns up.

    Yes, this house is VERY 70s. original mshag carpeting and linoleum everywhere!

    I was looking at the 2009-2010 Cost vs. Value Report and I just about crapped my pants. I always try to overestimate costs to cover my ***, but those numbers are outrageous!

    I've never aimed the sale of a house at a rehabber before, so I'm not sure what I could sell this to a rehabber for. If the realistic ARV is $425k, what could I expect to sell it to a rehabber for wholesale?

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Originally posted by Mark Beekman:
    I've never aimed the sale of a house at a rehabber before, so I'm not sure what I could sell this to a rehabber for. If the realistic ARV is $425k, what could I expect to sell it to a rehabber for wholesale?
    Depends. What area of the country?
    If it was here in So CAL, I would pay you $210k-$220k, assumming the exit of $425 and rehab of $100k

  • Investor · Phoenixville, PA · Member since 2008 · 257 posts · 18 votes
    16y

    Greater Philadelphia area. Bucks County.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    16y

    it's hard to pin down a price without knowing youre repair budget...a good rule of thumb i've seen on here is to buy at 70% below the ARV minus repairs. so if the ARV is absolutely positively 425,000, then subtract your repair budget from 297,500. If your repairs are 85,000, then you could sell for 212,500 and stll leave money on the table for the rehabber to profit--that's what a good wholesaler does. some will be able to pay more bc they use their own cash (like will i believe), while others will be more conservative due to loans, partner splits and hard money rates...best to know what your buyers are looking for and capable of...also, you really should have a better idea of that rehab budget. or, if youre good with 5 grand, i'd just get it under contract and blast it all over craigslist and put signs up for 205,000, and let the end buyers do their own rehab analysis. easier that way, but less profits..also, it'd be good to know how much it would cost to do these rehabs for the future.

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Why not pay a contractor (or get one free) to come out and bid the project? If that price comes in at $100k or less, you have yourself a deal (and if teh CMA validates the $425 exit)

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    16y

    Mark,

    I know a rehabber working Bucks Co. who was disappointed at the last sheriff sale I attended. They do higher end stuff, like what you are describing here. I can offer to introduce you. BTW - they are their own contractor, so they will know what kind of numbers to use for repairs.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    16y

    what's goin on with this deal?? it seemed like it had potential

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Originally posted by Bryan Alenky:
    what's goin on with this deal?? it seemed like it had potential
    I'm curious as well, any update available?

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    16y

    And I'm still more than willing to connect Mark with the rehabber I know (who went home empty-handed from the last sheriff sale) - and I wouldn't think of charging a fee for this sort of networking. And if the connection is made and they buy this deal, Mark could post the result in the BP Success Story forum ...

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    16y

    steve, that's a great offer from you...heck, i'd at least want lunch

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    16y

    Bryan,

    I'm already well-fed ... :D

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Originally posted by Steve Babiak:
    And I'm still more than willing to connect Mark with the rehabber I know (who went home empty-handed from the last sheriff sale) - and I wouldn't think of charging a fee for this sort of networking. And if the connection is made and they buy this deal, Mark could post the result in the BP Success Story forum ...
    Steve, if this were in the bulk REO thread, you would be asking for a POF, LOI, NCNDA, first born child, +3% and mothers maiden name before passing off your contact! :lol: There seems to be this impression by many newbies that easy profits can be made in RE simply by doing nothing, but passing on other's holdings (be it contracts, property, or contacts) and receiving miracle paychecks for doing so. How little do they know!

    Sorry for the thread hijack, back to the topic at hand . . . .

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    16y

    Will,

    Too many people in real estate are just trying to pry money out of others' wallets; I choose not to do so, and I'll just go about earning it - since that is something I know how to do!

    And connecting people makes them aware that you aren't another pick-pocket on the prowl. You already know that I passed along contacts to you from my area without any expectations of getting money - the rewards do come in other ways.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    16y

    .....guys, i was kidding..let's get back on topic and see if mark ever comes back...

  • Investor · Phoenixville, PA · Member since 2008 · 257 posts · 18 votes
    16y

    So sorry for not updating, guys. I was expecting an email notification when someone replies to my thread, which never happened.

    I had an agent run a CMA on the property and had a general contractor come out to give me a ballpark. Looks like the rehab would cost around $125k, give or take.

    I lowered my offer and the homeowner's son scoffed. I wished him luck and walked away. two days later he left me a voicemail asking me to call him back. I'm calling him tomorrow, so we'll see what he has to say. I WILL keep everyone posted, I promise!

    Steve, I want to thank you for your offerings of help, not just to me, but everyone here on BP. You're a good dude for spending the time helping out us newbs on here. It's very much appreciated.

  • Real Estate Broker · San Diego, CA · Member since 2009 · 119 posts · 54 votes
    16y

    Rehab costs are running me about 30-50 per foot.
    This looks like a good deal and my suggestion would be to get it under contract before you spend any more time on it.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    15y
    Originally posted by Mark Beekman:
    ...
    Steve, I want to thank you for your offerings of help, not just to me, but everyone here on BP. You're a good dude for spending the time helping out us newbs on here. It's very much appreciated.

    Mark - you're quite welcome.

    And I can still connect you to the rehabber investor who might just be willing to take this one, if you choose not to undertake the rehab.

  • Altus, OK · Member since 2008 · 2k+ posts · 690 votes
    15y
    Originally posted by Mark Beekman:
    So sorry for not updating, guys. I was expecting an email notification when someone replies to my thread, which never happened.

    I had an agent run a CMA on the property and had a general contractor come out to give me a ballpark. Looks like the rehab would cost around $125k, give or take.

    I lowered my offer and the homeowner's son scoffed. I wished him luck and walked away. two days later he left me a voicemail asking me to call him back. I'm calling him tomorrow, so we'll see what he has to say. I WILL keep everyone posted, I promise!

    Steve, I want to thank you for your offerings of help, not just to me, but everyone here on BP. You're a good dude for spending the time helping out us newbs on here. It's very much appreciated.

    Any update?

  • Investor · Phoenixville, PA · Member since 2008 · 257 posts · 18 votes
    15y

    The owner ended up selling it to someone else, which I'm OK with. There were simply too many variables with that house. It'll be interesting to see what the new owners sell it for (I believe the new owners are rehabbers).

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