Comparing Two Properties!
I have an opportunity to buy one of two houses in the same subdivision and I am trying to make up my mind which one to go with.
The properties are the exact same floor plan so size and general features are the same. Here are the individual details:
Property 1:
Brand New, never been lived in. Overlooks the neighborhood park. No upgrades, standard carpet, counter tops and cabinets. No patio off the rear. Smaller yard, corner lot.
Property 2:
2 years old. Bank Owned REO. Has upgraded countertops, cabinets and carpets (Carpet have to be changed). Double oven, countertop range. Needs whole house painting and minor repairs. Larger yard (450 Sq. Ft. Larger). center lot, overlooks other yards. Built in Covered Patio and balcony off upstairs MBR.
I am trying to evaluate which is a better property. Dollar for Dollar both properties are about the same cost (property 1 is overall cheaper but when I add the cost of installing countertops and building a covered patio addition it comes up equal.
I am thinking of resale value 5 - 7 years down the line. Do the upgrades and covered patio for property 2 really matter that much? Do they actually add real value to the property or just help it to sell faster? How does the location of property 1 contribute to its value?
This has always been a nagging question for me so I would appreciated everyones opinion.
Thanks in advance.
JS.
Thanks Newkid.
Both properties have already been discounted to below FMV. My question is how best to determine FMV for either property. For example, do the granite countertops, patio and upgrades mean that property 2 has a higher FMV than property 1?
I am using Comps to get a square foot cost and using that to determine the FMV of each property. On paper at least, they come up the same. Does this sound right? How do i factor the intangibles above (View, upgrades, Covered Patio, Balcony ... etc)
Thanks.
JS.
Thanks.
JS.
I would not worry about trying to be so precise. You will probably find that the repair/replacement costs needed for property 2 negate the value of the upgrades.
If both properties are "discounted" below FMV, then you have to determine which is the better buy based upon your use of the property.
What is your exit strategy?
If you are planning to hold for rental income, then base your offer on the best price you can afford and still generate a positive cash flow.
If you are planning to flip, what makes you think you can sell for a price that is higher than the already discounted price?
Good questions newkid.
My plan is to hold for rental, then sell in 3-5 years once the market recovers. I still want to buy something that has the best chance of a sale dow the line when i want to offload it.
Thanks for your comments.
Would anyone else like to jump in on this conversation with their opinions?
Thanks.
JS.
If you are buying ppty#1 from the builder and ppty#2 from the Bank (which has forclosed) You can probably get a better deal through the Bank. The Bank is penalized for holding REO property They are not in the property holding business! (The amount that they can loan is regulated) They are in the business of lending money, so there is your loan. You can bargan for a lower interest rate, lower closing costs and even tailor your payments for a couple of years. The builder can usually only bargan on price.