Is this a good deal? Need help to structure. - Posted by Rose

Posted by Rose on March 10, 2002 at 19:35:27:

After fix up the current market value probably will be $135K.


Is this a good deal? Need help to structure. - Posted by Rose

Posted by Rose on March 10, 2002 at 19:28:47:

I found a property that needs work and I need to hire small contractors who can do the work for me. (All costs come from my pocket.)

It’s 4 bedroom 1 bath and 2 car garage 1160 sqft home in a mix of owner and rental neighborhood. I want to structure this deal to work for me. I am thinking of talking to couple of contractors and have a bid on costs to fix this place. Asking price $116,900 currently (reduced from $123,900). I am thinking of offering $105K as is and am not going to pay any more than $110k.

It needs carpets, paint in and out, kichen cabinets, appliances, some yard work/cleanup, roof cleanup, 2 windows one is double sliding.

I have no idea how much all this is going to cost me. Would it be wise to say $10k? or more?

Once it is fixed I am thinking of 3 options.
Rent out for $1100-$1200 will have monthly cashflow of $175-$225.
Lease option with price $140K-145K - probably will make 20-25K.
Sell for $135k and make immediate $10-15K.

Any suggestions appreciated. How much shall I offer?

Re: Is this a good deal? Need help to structure. - Posted by JohnBoy

Posted by JohnBoy on March 10, 2002 at 21:41:36:

You cannot go by “probably” will cost or be worth. You have to KNOW what it will cost and what it will be worth after it’s fixed up.

To determine FMV you need to check the comps on comparable homes like this one and verify what they have actually SOLD for within the last 6 - 12 months. Do NOT go by asking prices on what other homes are listed for or what the seller says it’s worth or what some realtor tells you it would be worth! Go by the ones that have actually SOLD!

Then you need to KNOW a more accurate figure on what it would cost to fix up, not just guess on it!

If you were going to buy to fix up and sell for retail afterwards, then I would be figuring in,

$20k minimum profit for myself for doing all the repairs
6% of after repair value to cover realtor’s commission to resell
Up to 6 months holding costs on the money borrowed to purchase with to allow enough time to get it fixed up and resell it.
Total costs to repair
3% of value to cover any errors in my estimates
Any closing costs to buy and resell.

Then add all that up and subtract from what the actual after repair value would be to get the maximum amount you can pay for the property. Then offer below that amount to allow room to come up with a counter offer.

ASSUMING your estimates of $10k in repairs and after repair value being $135k was correct AND after figuring in the other costs I come up with a maximum offer of about $88,900 as the MOST I could pay on this. So based on that I would offer about $81,000 to start with, then have room to come up with a counter offer which I would counter with something like, $88,753.21 to make it look like I really penciled this thing out to push my offer up as high as I could possibly go!

But you have to KNOW these costs so you don’t get creamed by taking a loss in the end if you don’t figure out your costs correctly!

Re: Is this a good deal? Need help to structure. - Posted by garrison

Posted by garrison on March 10, 2002 at 21:00:46:

i have my own contractors who work for me and i do very similar work to properties.

windows : 250 a piece installed
kitchen : 2000
appliances : 800 (best buy)
clean/haul : 500
carpet : 1200
paint out : 1000±
paint in : 1500

of course everything depends on how detailed you get and who you hire.

but these guidelines work for me in similar sized properties and in my area (baltimore) plus dont forget about misc. expenditures (they always pop up right when you think youre making out good)


Yiikes - Posted by Rosie_FL

Posted by Rosie_FL on March 10, 2002 at 20:43:29:

You need to read a good book/course on rehabbing.
If you think it’ll cost 10K to fix, plan on 20K.

110K purchase price + 20K repairs = You lost your shirt on a $130K house.

Please search the archives on rehabbing.
Look for the 70% of After Repair Value formula.
Look for list of costs, like closing costs times 2, holding costs, financing costs, purchasing costs, selling costs, etc.
Look for “10% of any deal is air”.

You need to make an offer based on what you can pay. It really has NOTHING to do with what it is listed for.

Good luck, now go refigure that offer.

Re: Is this a good deal? Need help to structure. - Posted by wayne

Posted by wayne on March 10, 2002 at 19:32:17:

You never said how much its worth? without that we cant help.