ARV * .6 = 102k
Our ARV * .6 comes in at 102k. We are getting the property for 62k, and am not sure we can do a full rehab for 40k. How flexible is this formula of ARV * .6? This place needs a full rehab, its a smallish house about 24x44x18 but needs new siding, windows and all new interior. There seems to be so much equity in the property but in reading these posts peoples numbers seem very conservative. Comps come in at 185 but I used 175 for the calculation.
Any thoughts??
www.equityrus.com[ Edited by equityrus on Date 01/26/2005 ]
I know people who use 60% - 70% minus repairs to come up with thier offer. It all depends on how long the rehab is going to take and what your personal goal is for the indivual property... If the rehab will only take 2 months and houses only stay on the market for days, then you can probably afford to pay a little more...
Good Luck!
[addsig]
Thanks for the feedback...
We are doing a home inspection to see exactly what needs to be done. Then we will see what the costs will be.
My feeling is if we spend 115k on rehab and buying of the home, there is a nice profit to be had even after factoring in closing costs, holding and insurance costs.
Using comps of 175,000. The breakdown should look like this conservatively:
175000 - market value
-62000 - price of home in pre foreclosure
-50000 - renovation costs
-14750 - closing costs and broker fee
- 4000 - holding costs, prop taxt (based on convent mortgage for 4 months)
-5000 -misc costs
I get 39k and change. Not a bad deal. What do you guys think?
www.equityrus.com
Hi Equity,
I recently had a very similar situation, with a home requiring about 50k in rehab on a property we bought for 40k. based on the situation, we determined that was better to tear down the old house and build a new one, thereby selling (or at least we plan to sell) at the high end of the comps in the area.
One of the key benefits to us on this situation, is that I financed most of the 40k purchase price, hired a local builder to do the demo and build the new home, and we either have to pay him fro his work when he is done (he used his own construction line of credit to finance his costs), or we will just turn around and sell the house to the end buyer when his bill is due - basically we anticipate making a 60-70k profit and have very limited exposure - if we do not locate a buyer by the time the builders invoice is due, we can do a bank refi at 80% of the appraised value and payoff both the builder, original mortgage and put a litttle money in our pockets
hope this doesn;t distract you too much, but there may be a better way for you to do this deal.