Posted by Brent_IL on March 20, 2002 at 21:56:18:
Disclaimer: I’m not a true rehabber. The only non-gardening tools I own are a screw driver, a hammer, and pliers. I avoid them all, especially the gardening ones.
I think the challenges you will face will be substantial.
From your repair questions, I got the impression that you don’t have a construction background. I’m not sure that the limited time that you have available over the next six weeks (Fridays) will be long enough to get up to speed.
If your quest for a hard money lender is successful, you’re looking an acquisition price of around $4,000 to $8,000 paid for a full rehab candidate with an ARV of $50,000.
1 - Your friend’s broker should be teaching him how to use the MLS service. If you don’t make unreasonable demands on his time, he may as well practice on your requests as on any other.
2 - Sold comps are a good indicator of FMV when you’re comparing apples-to-apples.
Make sure the parameters match the property under consideration and the comps are current. During a normal market in northern Illinois over the past few decades, houses have actually sold at between 91% and 96% of listed FMV; this doesn?t count bad original listings. It’s hard to know if a given property has “promise” until you get a handle on rehab costs. I just read a post at http://www.creonline.com/wwwboard/messages/86169.html that gave some guidelines. If you search the archives you will find others. KentC once posted some costs as ?Waste line $3000, Kitchen $8-15k (call it $12), bath $5k, carpet $2500, linoleum $800, walls interior $1000, paint interior, $1500, paint ext $1500, furnace $2k (CHA)-$8k (northern basement boilers or the like), doors $500, misc unexpected $2000, landscaping $2000.? I copied the costs, but not the URL. In my area the costs are slightly higher.
3 ? When you?re looking for houses that can be wholesale flipped to another investor at a profit the primary source is bank REO?s. They are unlikely to respond to an offer that has exit contingencies for anything other than clear title.
4 ? I?ve found that detailed free estimates are done by the companies charging the highest prices to homeowners. Their market is not rehabbers. Sometimes inexperienced workers looking for their first customer will go into more detail. That said; many good tradesmen will give you a quick estimate if they have the time. It?s more convenient to reach them by phone in the early evening. As has been posted hundreds of times, you need to get good referrals. Home Depot once gave me the number of the roofer who bought the most roofing supplies from their store. He not only met me at the house, he spent ninety minutes explaining why, based on his overall construction experience, I shouldn?t buy the property. The cost for saving untold thousands of dollars was $35.00. He told me to mail a check to his wife.
If you accept the premise that your wholesale buyers are going to want an amount equal to the amount of repairs as their profit, subtracting $25,000 plus profit doesn?t give you a whole lot to work with.
5 ? When deciding if you can make money by doing part of the work yourself the considerations are time and the ensuing holding costs, and ability. Remember that your buyer would rather do most of the work so he can pay less for the property. Joe Kaiser wrote an article on ?Maximizing Profit With A Prehab? in the How-to section onsite.
Best of success with a daunting task.