Posted by JohnBoy on June 20, 2000 at 11:58:52:
You say the house looks good on the outside, but then you say in the same sentence that the other homes stand out because they look newer. Are the other homes newer? Are they about the same and just appear to be newer? If they just appear to look newer then this house must not look very good on the outside then??
As far as the remodeled home listed FSBO at $84,900, you can’t go by that. That’s just the ASKING price. What you NEED is recent comps on similar homes that have ACTUALLY SOLD in the area. Don’t accept what the realtor tells you or by any comps s/he shows you. They can hand pick their comps showing you only the highest priced homes that sold. You need to get your own comps. You can get these from county records, a title company, or an appraisor.
Once you KNOW what the true value is after repairs then take 70% of that price as your starting point. From there you deduct the actual costs of repairs needed. Don’t guestimate on this. Get actual numbers to verify this cost. Then deduct that amount from the 70% value. After that deduct $15- $20k profit for the investor you will be flipping to. Next deduct up to 6 months holding cost the investor will pay on his money tied up while he does all the repairs and markets the property to resell. Then deduct 6%-7% for the realtors commission the investor will use to help resell the property. Then figure in how much YOU want to make. After you figure out all these costs and deduct them properly that will tell you the MAXIMUM amount you can pay for the property. Make your first offer below that amount to leave room to come up some on the counter offer. They will always counter on your offer.
If you’re unsure of the fix up costs get a handyman or a contractor to give you a free estimate.