Am I Trying To Make Too Much??
I found a home in my area that needs extensive rehab. The home is being listed at 154,900. I believe that the home will need roughly 20k to make it a great place. I talked to my realtor and she figures that the home fixed up can sell for 186,500. This was figured using a median price of comprable homes in the area. Now the question is all the books I read say to offer 25% less the list price. When I did this I was shot down. My question is what can I figure to make on a rehab 10k clear or more or less???? :-? :-? :-?
SL:
Do a search on the forums for "MAO" (maximum acceptable offer?). It's a rule of thumb formula for figuring out your offer.
I'm up in LITH as well: check your private message for my contact info.
Andy
"all the books I read say to offer 25% less the list price."
What books say that? Thats the stupidest bit of advice I've heard in a LONG time. What if the property is listed at twice fair market value? What if its listed for half of fair market value? Either way you offer 25% less than listing?
Look, don't worry about it when offers get turned down. You offered what you thought was a fair price. They think its worth more. Move on.
Are you new to this? There is a lot to think about.
How will you acquire it? What kind of purchase? What kind of financing? Will you have closing costs, carrying costs? Insurance?
How did you arrive at your $20k estimate for fix up? Extensive rehab may be more than that. Will you do the work, or contract it? How quickly can it be done?
If this could be acquired subject to, avoiding a bank loan, you would save about $3500 in financing costs. However, if the seller wants his equity now, and realtors want their fees, it will cost you.
Looks to me like you need to sharpen your pencil and do your due diligence to answer all questions.
If this is your first deal, take someone with you who knows rehabbing.
Remember, when you make your money in this business is not when you sell, but when you buy.
Dan