Posted by Brad TX on December 19, 2000 at 13:30:28:
I’ll talk to the contractor see if that would work.
Thanks,
Brad
Analysis of a rehab (long) - Posted by Brad TX
Posted by Brad TX on December 18, 2000 at 09:39:49:
This is my first deal, and it’s a major rehab. I framed houses for awhile out of high school, and just completed a rehab of a 2,000 sq. foot old home I purchased to live in. So, I’m handy somewhat, and not totally green when it comes to houses and contractors.
Subject: 80 year old home, 10 foot ceilings, 2 bed, 1 bath.
The home is level and solid with a nice layout. It’s just been vacant and neglected for 5 years.
Source of Funds: Hard Money Lender
Exit Strategy: Owner Finance and sell the note at closing to Hard Money Lender’s sister company for 91 cents on the dollar.
Purchase Price: $12,000
Closing Costs: $600
Points to HM Lender: $600
HM Lender Filing Fee: $200
HM Lender Handling Fee: $200
Appraisal: $325
6 mo est holding cost: $3,000
rehab w/ oops factor: $30,000
Advertising: $300
Discount on note: $5,265
TOTAL COSTS: $52,190
Estimated ARV: $65,000
Estimated Profit $12,810
My question is, is this a reasonable risk? If I go over on my rehab by $5,000 and have to sell for $59,000, for whatever reason, I might just break even. If I can reduce the rehab costs to $25,000, and I can sell at my estimated price, then my profit jumps to $17,810.
Are these risks just inherent in a rehab? Is this deal worth the risk?
Thank you,
Brad TX
Re: Another possibility - Posted by BilLW
Posted by BilLW on December 19, 2000 at 16:44:21:
brad, Have you thought of doing a very minor cleanup and simply flipping to someone who wantds to live in the place and is willing to do the rehab to save some money via their sweat equity. You might be able to simply flip it to them and yet still make your anticipated profit.
BillW.
Analysis of comments on a rehab - Posted by Bud Branstetter
Posted by Bud Branstetter on December 18, 2000 at 21:19:52:
The naysayers are out there because it is your first deal or they want to make more profit. The question is more involved. I would look at the possibility of converting to a 3-2. Many of the older homes have obsolete plans such as going through one bedroom to get to another. Dining rooms need to be opened up to the kitchen in many cases. Is rewiring, sheetrocking, leveling, new AC etc required. If you have the contractors lined up it can take less than 6 mo. If you do it yourself the interest eats you up.
While the hard money lender is nice enough to offer to buy the note he is also making more profit than selling it elsewhere. A good mortgage broker can probably get your people a loan at more cash to you.
If you want a further analysis of the rehab costs, send them to me directly and we can discuss.
Re: Analysis of a rehab (long) - Posted by CurtNY
Posted by CurtNY on December 18, 2000 at 12:01:57:
Brad,
I think there may be a deal here if your figures are correct but being this is your first I might pass. If your figures are off, or the neiborhood isn’t the best and have a difficult time selling you might end up with a costly lesson. Take it from me, it took me almost 1yr to sell my first rehabb project 3 yrs ago(took some bad advice). Holding cost can kill a deal quickly. Although the lessons I learned are priceless I wish I did some things differently on that deal (It was a great deal when I started). Keep looking & Good Luck!
CurtNY
A little slim - Posted by Shawn M. Crawford
Posted by Shawn M. Crawford on December 18, 2000 at 10:04:40:
Brad,
I realize you are just starting out and probably chomping at the bits to “do a deal” but on a rehab flip deal (which provides a considerable amount of cashflow to my business) for less than $20,000.00(with a conservative proforma) really isn’t worth my time…not to say (or persuade) you it isn’t worth your time.
Just my thoughts.
Shawn
Thanks Bud… - Posted by Brad TX
Posted by Brad TX on December 19, 2000 at 08:33:10:
I wouldn’t know how or where to add the extra bathroom to convert this 2/1 to a 3/2; however, there is a formal dining room off the kitchen which could easily be the 3rd bedroom. Also, the kitchen is large enough to include a dining area. So, there’s my 3/1.
I’m lining up the contractors now. I have one doing the roof, repairing rotted wood, adding a small addition off the back kitchen with a washer/dryer hookup. I’m having another provide estimates for the interior - sheetrock, painting, etc.
I’m meeting with the city inspector on the Thursday to look at the wiring and plumbing.
I should have a pretty good estimate of the repairs in the next few days.
There’s no central air/heat, or window units. I still have to decide what to do there.
When I get a good breakdown of the repairs, I’ll send it to you.
My thoughts on seller financing: It will cost me more, but I can move the house faster if I advertise “no banks, no closing costs”. But maybe I should give the other route a try first. It may just work out, and it will save me a good chunk of money.
Thanks for your post,
BradTX
Thanks Curt - Posted by Brad TX
Posted by Brad TX on December 19, 2000 at 08:40:44:
I’m still working the rehab numbers. I’ll keep everyone updated on my progress.
Brad TX
Your right… - Posted by Brad TX
Posted by Brad TX on December 18, 2000 at 10:15:57:
I AM chomping at the bit. Getting one under my belt, for me, is a big deal. A $10,000 profit would be incredible. Breaking even would be a good learning experience. I’m just in a different place than you. I’m at the beginning and wanting to learn the process.
It’s encouraging to hear that $20,000 is your minimum and also that rehabs are the main source of your income. I hope to be there at some point.
Thanks for your post!
Brad TX
Extra Bath - Posted by CurtNY
Posted by CurtNY on December 19, 2000 at 12:19:43:
Brad,
If your going to add a small edition off the kitchen for washer & dryer, why not add a toilet, at least you’ll have a 3/1.5 (much easier to sell than a 2/1). The plumbing shouldn’t be an issue since you’re already running the pipes for washer & dryer, definately worth the extra cost! Good Luck!!!
CurtNY
You can learn and Make Money at the same time - Posted by WayneMD
Posted by WayneMD on December 18, 2000 at 11:29:22:
Much too much work for estimated profit. Be a little more patient and keep looking.