Deal? Not a deal? - Posted by Michael(KCMO)
Posted by Michael(KCMO) on March 09, 2006 at 06:18:48:
I have a house under contract that I thought was going to be a pretty good deal, but now I’m not so sure due to the appraisal coming back less that I had expected. I wanted to get your input and see what kind of criteria some of you more experienced investors go by.
HERE’S THE BREAKDOWN:
3/2 in a nice, middle class neighborhood in the Kansas City area.
About 1,100 square feet 1st floor (all one level except basement).
About 760 square foot basement including the one car garage.
Lot size is 100’ x 400’ deep - this is an extra large lot for the neighborhood with a huge fenced back yard. That’s part of the appeal, as I have a 4 y/o daughter and it would be great for her to run around in.
Purchase price is $59,500 from bank foreclosure w/ seller(bank) paying $1,000 of closing costs.
Needs a complete gut/rehab including all sheetrock, new kitchen/baths, new plumbing & wiring. Same on exterior - rip off several layers old siding & redo w/ vinyl. Basically, we’re reusing the shell and building a new house from there out.
ARV appraised value just came back at $118,000
I have yet to receive back a bid on the rehab, but initial indications are putting it around $45,000-$50,000.
Given those numbers, there would be approx $10,000 equity more or less.
Ok, if this were strictly an investment I could tell you already that it’s NOT a deal. However, my intention is to live in the home and am wondering how much of a factor that should play. Even if it were strictly an investment, what kind of minumum equity do you guys look for to make it worth your while when you’re doing something like this? Would you guys walk (I’m beginning to lean that direction), or do you think there’s a way to make it work? My initial thinking was that if the numbers would allow about $20,000 equity it would be well worth it for me - especially since I’m planning on living there.
All input and advice is greatly appreciated.