Just realize that FMV is for what price a house will sell. Not the price that other people are asking. Also realize that some markets are so soft that no one is buying and a low selling price will not make a difference. I have two houses for sell now that are priced well. It is just that nothing in that area is selling. I do not think that lowering the price will help. If anyone wants to buy in that neighborhood, they will choose mine because it is totally rehabbed and priced well. Unfortunatly, no one is buying.
I use to just do the MAO (maximum allowable offer formula) to make offers. Now I also look at the sellability of the nieghborhood. There are many condos communities in my area that if you made offers at 70% minus repairs at the sold comps you could still get stuck holding the bag. Yes the ones that sold may have sold for say 200k, but there are now many on the market for 180k that are not selling. I look at how many solds vs actives for the last 12 months, and the last 6 months. I also look at how long the solds and actives stay on the market and the price trends.
A soft market makes it a lot harder to know what is FMV, ARV, or a good offer.
Again, just my opinion: If you can keep your primary business operating and feeding your family, a side business of buying, rehabbing and selling (or renting) distressed properties would be a great sideline.
Your overhead structure and earnings requirements would probably make you much less competitive with the Jacklegs we normally see on rehab jobs.
How would you compete with cash labor (no WC or liability insurance, no w/h taxes, etc) that the Jacklegs work with?
[addsig]
I am from your market , worked for Teeple & Thatcher, Fox, and an number of other contractors in the Portland area. Until two years ago I worked as a GC in central eastern Oregon (Bend now being the second hottest market after Salt Lake). I still have land and property interests in the Oregon City area.
There is lot more money in rehab and it comes a lot faster than in new construction. Additionally it is not as competetive as it is alot harder to rehab than build new and profits come quicker and can be a lot higher.
50-70K per house over the 6-8 month period it takes to build and sell is not stellar unless you are able to do a large number at a time.
It ties up a large amount of your own capital for a long period of time and if you finance everything there are limits to that as well.
Salt Lake (where I moved to 2 years ago) is a hotter market than Portland or Bend with the land being even more limited as mountains form the natural boundaries of the metropolis.
In rehab the cash outlay is not quite as intensive and the project is done much faster with the profits being as good as what you are seeing in new construction.
Sometimes when I have too many to rehab I wholesale one for quick and easy cash. We have done several of those in the last 60 days with 25-80K profit and none of my own or any bank money involved.
Like finding dirt the challenge comes in finding the property. It is there and abundant, you just have to look for it in different ways than what you are used to doing.
Additionally you can look in areas outside of the Beaverton area in some of the smaller boundary cities.
I have a student/friend I mentored in Burns that is making a killing and that is a very rural market.
I have the same question 2 years later!
Anyone out there??
One of the people in my office went and learned quite a few different techniques there.
That said, they have done only one deal in the last year.
[addsig]
ONe more thing, he has materials on Ebay quite frequently that you can get at a discount...
[addsig]
YOu have to define FMV first. I define FMV as the value at which a property will sell within 60 days or less.
This is not what the appraised value is but what the houses are selling for in your market.
If you take that value and then pay 65% you will do just fine.
Values are always changing and you need to stay aware of what is happening in the market.
[addsig]
Excellent..Thank you...I knew you would chime in!!
Just realize that FMV is for what price a house will sell. Not the price that other people are asking. Also realize that some markets are so soft that no one is buying and a low selling price will not make a difference. I have two houses for sell now that are priced well. It is just that nothing in that area is selling. I do not think that lowering the price will help. If anyone wants to buy in that neighborhood, they will choose mine because it is totally rehabbed and priced well. Unfortunatly, no one is buying.
I use to just do the MAO (maximum allowable offer formula) to make offers. Now I also look at the sellability of the nieghborhood. There are many condos communities in my area that if you made offers at 70% minus repairs at the sold comps you could still get stuck holding the bag. Yes the ones that sold may have sold for say 200k, but there are now many on the market for 180k that are not selling. I look at how many solds vs actives for the last 12 months, and the last 6 months. I also look at how long the solds and actives stay on the market and the price trends.
A soft market makes it a lot harder to know what is FMV, ARV, or a good offer.
Again, just my opinion: If you can keep your primary business operating and feeding your family, a side business of buying, rehabbing and selling (or renting) distressed properties would be a great sideline.
Your overhead structure and earnings requirements would probably make you much less competitive with the Jacklegs we normally see on rehab jobs.
How would you compete with cash labor (no WC or liability insurance, no w/h taxes, etc) that the Jacklegs work with?
[addsig]
my GC contractor partner likes rehabs as he can run several at a time as in general the require less management.
His specialty is interior wood work, custom cabinets, crown molding, etc.
But he also does the following
rehabs
new construction both commercial and residential
The new construct is the highest margin 9/10 times.
I am from your market , worked for Teeple & Thatcher, Fox, and an number of other contractors in the Portland area. Until two years ago I worked as a GC in central eastern Oregon (Bend now being the second hottest market after Salt Lake). I still have land and property interests in the Oregon City area.
There is lot more money in rehab and it comes a lot faster than in new construction. Additionally it is not as competetive as it is alot harder to rehab than build new and profits come quicker and can be a lot higher.
50-70K per house over the 6-8 month period it takes to build and sell is not stellar unless you are able to do a large number at a time.
It ties up a large amount of your own capital for a long period of time and if you finance everything there are limits to that as well.
Salt Lake (where I moved to 2 years ago) is a hotter market than Portland or Bend with the land being even more limited as mountains form the natural boundaries of the metropolis.
In rehab the cash outlay is not quite as intensive and the project is done much faster with the profits being as good as what you are seeing in new construction.
Sometimes when I have too many to rehab I wholesale one for quick and easy cash. We have done several of those in the last 60 days with 25-80K profit and none of my own or any bank money involved.
Like finding dirt the challenge comes in finding the property. It is there and abundant, you just have to look for it in different ways than what you are used to doing.
Additionally you can look in areas outside of the Beaverton area in some of the smaller boundary cities.
I have a student/friend I mentored in Burns that is making a killing and that is a very rural market.
[addsig]