This is an email sent to my mentor, but I'd also like it peer reviewed by you fine folk.
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So, we’ve looked physically at our first two prospects sent over by our Realtor. A true dichotomy of properties.
The first is in a nice neighborhood, with well kept homes and lawns. It’s listed at 20,900 and need about 20,000 in repairs and renovations. It’s a 100% gut and do-over. Nothing is salvageable. The pipes have burst, the lower level is filled with mold and fallen down ceiling and walls. However, that being said, since we’re in it for the long haul, the home if fixed up could sell quite nicely in the future. On a corner lot, nice large garage, et al. It has a lot going for it if it were fixed up. Westland is .176 mills in taxes and only requires an inspection every 3 years for 100.00. This is a 3br/1.5ba detached 2 car garage home. I would suspect based on craigslist/zilp.com/finestexpert.com that it would rent for 750-850/mo. Again it requires 100% demo/renovation. Well, I guess the brick can stay.
The next unit we looked at was the complete OPPOSITE of what we just saw. This unit is 2br/1ba 760 sq ft. in Westland but down more near the projects of Inkster. Within a medium walking distance. The neighborhood it’s in though is for the most part well kept and clean. The neighbor to this house is the exception, with junk in the lawn, a big pit bull behind the fence, et al. The great benefit of this house is that it’s already had all the major items except the roof done for us. New furnace 93% efficient, new AC unit, new railing, new energy efficient windows, updated electrical. It needs all cosmetic work and likely a new roof which we don’t have to put on this year, but will in a couple for sure. New basement windows and refinished flooring and we’re done. Based on my estimation we would be able to rent this unit LOW balled for 650, likely 700.00 (I say this understanding I have never done this before and have no sure idea to know what I’m talking about besides to the tools I use to make these guesses)
So do you have any advice on how we should proceed? Obviously, we would offer well below what they’re listed for, but in the case of the first unit, I think the bank should give us money to take it off their hands. It’s listed at 20,900, I think a fair offer is 900? LOL. However it’s also our first project. Do we really want to get into a 100% renovation? Is the back end worth it? If we did seek cash for the renovation could we /would we do that through a bank or through silent investors and what terms or guarentees would we give them on their money? How does that work?
The 2nd unit is ready to go? Some paint and a spit shine and we’re marketing? We’d offer I’m guessing 10,000? The backend is much less though? Maybe worth 50-75K in 5-10 years? Whereas the other would be worth 120-150K?
Thanks for all the help! It’s greatly appreciated!
--Rael
