Hey BP'ers,
I am posting to try and get some advice about a situation that has just come up.I’ve been actively looking around for what would be my first real estate deal.
My mother-in-law recently had a fall, and has decided that her townhouse is too much to care for on her own, and she would like to downsize.
The townhouse she is currently living in, is your classic little old lady house. She bought the home in 1991, and if you walked inside now, you would instantly be teleported to 1991. Nothing in the home has been upgraded but it has been maintained. For example, it is the same carpet as 1991. You can imagine what 24 year old carpet looks like.
My wife, trying to be helpful, suggested that I buy the house from my mother in law, in order to fix and flip it.
My mother in law realizes that I want to make a profit, but at the same time I don’t want to screw her out of her hard earned equity.My contractor and I have gone through the house, checking all the mechanicals, roof, foundation, etc., and it is in great shape, it just needs a lot of cosmetic work.Further, the contractor I used is a bit on the expensive side, so I do have a little buffer there.
My problem is that I’m not sure what to offer her exactly, or even if I should take this on.Thanks for any thoughts or suggestions.
Rough Numbers (assuming 6 months of holding costs):
Purchase Price - $290,000
Closing costs - $10,150
Property Taxes - $1,700
Appraisal - $400
Total Acquisition: $302,050
Cost of rehab - $29,000
HOA - $456
Utilities - $2100
Total Funds Required: $333,606
ARV - $389,000
Cost of the sale - $38,900 (This seems a bit high to me, I got this from my realtor.I believe she is factoring in closing and 6% commission)
Interest on Loan - $3,700
Net Sale - $346,400
Estimated Profit: 13,794