Posted by Millie I. on June 03, 2000 at 24:36:20:
George,
Assuming that it would appraise for $500K when you sell, I would start with 90% of that as potential final sale price, which is $450K. Subtract $200K for the rehab, pay yourself as least $100K, that means the maximum you can pay is $150K. Since this is an abandoned building, it has to be sitting out there for a long time being turned down by many investors who didn’t want to take on this major risk. In this case, I might start with 50% of the max , which is $75K, and see where I go from there. I certainly don’t mind just paying for the land only if I can. The asking price is irrelevant, they don’t have to sell it to you if they don’t like the offer.
I don’t buy abandoned buildings, but I buy a lot of neglected houses. The figures are different, but the concept is the same. You don’t take the risk unless you can make a killing.
You gave no details, so I will stay general, but you still have to make sure that when the project is done, the demand is out there to take it off your hands. Appraisal is one thing, making the sale is a totally different question. Holding costs add up after a while.
Best of Luck,
Millie I.