Should I Have Done This Deal?

InActive_Account profile photo

Hey, all... I'm new to REI, and my interest was sparked last year when I was house-hunting and I came upon a situation. I didn't have the ability to analyze the deal at the time, and I'd appreciate any help looking at it now to try and learn from it:

It was a lakefront home in a mixed area outside the city of $200k-$300k homes and trailers (rural). I ran a number of comps and feel confident that the house would have gone for just over $200k ARV.

The house was quite torn-up, however. It had been vacant for 2 years with no sign up, and no mls listing. The owners had been rehabbing it themselves (contractors) when one of them died. The other inherited the deceased's fortune and moved away. I contacted them, and they said they could go as low as $170k... after a little more conversation, I am confident they would have taken $150k.

The house had been completely redone from a 2 br to a 5 br, had all of the structural work done, but still needed flooring, drywall, etc in most of it. Almost ALL of the items needed (including new appliances in boxes) were in the house or the shed. I had a friend who worked in construction take a look at the work needed, and the materials provided, and he estimated that the total repair bill would come to $7-8k. He also said that all the carpentry, electric, etc. that had been done was far superior to most houses... clearly this home had been their personal labor of love.

The house is near major resorts, so I feel confident I could rent it out, but I have no rent comps for it. The ARV sale comp, though, I am confident in, if I needed to sell it.

ARV = $200k

Given the newfound financial status of the owner, and the fact that the property had become a liability to them, I feel confident they would have held a note if necessary.

So... where should I have started? Assuming I was just going to flip the property, how (no experience, low 600 ficos, very little $) should I have structured it? What about financing the repairs? What would have been reasonable terms? What other info did I need?


  • commercialking18th May, 2004

    Is the deal still available or is this just a hypothetical proposition?

  • InActive_Account18th May, 2004

    Nope. It was just recently sold, and all I can tell is the $154k price that shows up in the records. The new owner listed is some sort of investment company.

    I'm not trying to dwell in the past here, just trying to see what, if anything, I can learn from the experience... and be more prepared next time.

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