Posted by Eric on July 02, 2003 at 13:23:58:
Hi -
I’m trying to learn more and more about investing and have a quick question for Marcos. What does the 70% in your equation refer too? Sorry if its a dumb question. Thanks.
need advice, rehab or sell wholesale? - Posted by Lisa Winding
Posted by Lisa Winding on July 02, 2003 at 10:09:34:
SFH purchase/rehab, 2 bedrooms, L/D, finished basement that needs about $14,000 in updates. Purchase price $46,000, closing on July 10th. After repair appraisal at $85,000. My original plan was to rehab and hold for rent but the situation has changed and I will need cash fast by end of this month. I’m wondering should I sell it as is to an investor or should I repair and then try to sell. Remember the need for cash by end of month. The repairs can be done in a week. What should I do?
need advice, rehab or sell wholesale? - Posted by ken in sc
Posted by ken in sc on July 02, 2003 at 12:57:20:
Marcos has given you a great answer. My question: Why do you need the money so fast? Your answer may be none of your business and that is OK. But if you need money for another deal, maybe it can be found another way. Maybe a partner for that deal. Or if you can renovate this one quick enough, and already be working on a refi, you might could cash out some $$$ and keep the house as a rental. But I guess what I am saying is if there is a way to fund whatever you need the money for another way, you wont have to give up your profit from having negotiated a nice deal here.
Ken
Re: need advice, rehab or sell wholesale? - Posted by Marcos
Posted by Marcos on July 02, 2003 at 11:11:15:
Well, it’s an interesting question you asked. I don’t know that you’re going to have an easy exit by the end of the month. The problem is you got a good deal, but not a screaming deal. It will be difficult to get an investor to buy this, as you are near the top of what most investors will buy for. ($85,000 * 70% - $14,000) = $45,500.
My other concern is that you feel that you need $14,000 in repairs, and you feel that you can get them done in a week. Well, in my experience you most likely fit into one of two boats.
- You are paying WAY too much for your repairs. or…
- You are vastly underestimating how long it will take to complete those repairs.
So, the problem is that these things take time. Real Estate by it’s nature is illiquid. It takes a while to get rid of it. Even if the repairs were done today, unless you sold it at a pretty good discount, it’s going to take you a while to actually get paid. I generally plan on about 90 days to market and close on the property. Occasionally I have been pleasantly surprised, more often I have been rather disgusted with how long it actually took, and what I had to do to get it done.
Oh yeah, and I read that you haven’t even closed yet. Wow, tough one. My advice would be to try to flip the contract to another investor, but most likely you won’t make any more than $2-3k on it. And that would be best case scenario. And I don’t know if that is what you need. But, I see no other way you can close on the tenth and get any cash out of the place within 20 days.
On the flip side, even though my response sounds negative. I still applaud you on your purchase, it looks like if you can get those repair estimates down, and get them done on time, you have the potential to make a nice profit. Just probably not going to happen in the time frame you wish for.
HTH,
Marcos