Opinions Please...
I am pretty much a newbie in this biz, I have been reading and reading this site, and have watched my father, for the last year, make an absolute killing in this biz....I have done a few birdogs, but I think I am ready to do my own deal, and may have found it....
....here are the details.....3/2, 1600 square feet, sold for $145,500 two years ago, is assessed at a little over 100K.....the bank is selling it, is a repo of somesort.......it needs quiet a bit of cosmetic work, it doesn't have central a/c, I would probably need to put that in, the inside and out needs to be painted, new carpets, etc........I would estimate rehabbing at $20-25K....now the good part is that it is in a great area, (3 schools within walking distance, major highways with 1/4 mile)...It has a lot of potential to bring great positive cash flow if I rented it out (after rehab)....the asking price is $104K....I would estimate that after rehab, it would appraise at 140-150k (I checked the comps in the neighborhood).....I plan on throwing them a low ball offer of 65-70k, but paying no more then $80-90k, lets say I paid 80K, and put in 30K worth of work, I still think that would leave me with a lot of profit to make, and I can rent this place out 1200-1300 all day long....
My questions are
A) being a newbie, and not knowing to much about rehabbing, should I stay away from something that needs a lot of work (I have heard countless stories about people who aren't scared of rehabbing and in return making lots of money on these deals)
B) does this sound like a good first deal???
C) if I do think it is worth it, how do I even begin, I call the bank and make them an offer, and put up earnest money?? or what?? because it is a bank house, are there other steps??
Thank you for any advice, and if I don't make since in a certain question or detail, please let me know so I can elaborate....
As a newbie myself, I don't have a lot of seasoned investing advice to give.
However - make sure you get your rehab estimates from a real handyman/contractor who knows what to look for. I could look all day long and not know the difference between blue glue and the good stuff, or know how to sniff out an imminent termite infestation...likewise, roof and structural inspections will save you a bundle if done correctly.
Just be safe, and good luck!
I'm a newbie too but I'll toss my humble opinion on the table. It sounds to me like a great deal if you can make it work. I have no fear of rehab personally and am in the second week of my first one.
A) I would only do it if I had someone on my team that is familliar with what it takes to do the work. Contractors make a killing on "extras", mostly things that they knew you forgot to put in the scope of work that they will only bring up later in the middle of construction.
B)Sounds like a great deal if you can make it happen
C)If the property is listed, use a buyers agent and they will take you through the process. If not, I would guess that the steps you just listed should be sufficient. My experience is that banks are extermely slow , you might not hear back from them in regards to your offer for weeks. I once offered a bank exactly what they were asking for the property. This property had been on the market for about 9 months and had the price recently reduced. The bank rejected my offer 3 weeks later and raised the price because they recieved a few more offers and thought they may have dropped the price too low! Turned me off to banks.
Marv
One thought I have is that cosmetic work which includes central air, paint, and carpet should not cost 25k to fix. The first thing that you should do is make sure you estimate repairs correctly. There must be some otherstuff to do to cover that much for an expense.
Other than that I would go for it. Do you plan on getting a conventional loan? You should definately get financing in place before so that you can submit proof of funds with your offer. It will definately help you with your offer.
GOOD LUCK
The $25K was just a number that I am using to be as liberal as possible...I don't want to assume something like 10k and then find other stuff that needs to be done that I didn't take into account when figuring out potential profits...I think $25k is an exaggerated amount, but I would rather be safe then sorry...
Can I put in the contract as one of the stipulations that.....'I can back out of the contract if I have a contractor appraise necessary work and it exceeds a predetermined about stated in the contract as X amount'.....???
The $25K was just a number that I am using to be as liberal as possible...I don't want to assume something like 10k and then find other stuff that needs to be done that I didn't take into account when figuring out potential profits...I think $25k is an exaggerated amount, but I would rather be safe then sorry...
Can I put in the contract as one of the stipulations that.....'I can back out of the contract if I have a contractor appraise necessary work and it exceeds a predetermined about stated in the contract as X amount'.....???
Jason: The deal sounds pretty good, but , unless you are trying to get going on your own, why not ask your dad for some advise? Also, if the house appraised for 145K two years ago..why is it only worth 100K or so today? Did it recieve some serious damage? Being in new construction, and living in Port St. Lucie, a new A.C unit ( complete) will cost around 5K for a 1600 sq.foot home. I think that 5K is being a little conservative though. Also, being that the home did not have central heat/AC then there is a good chance that the electric panel will need upgradeing. While you at it, get ahold of FPL and see what type of programs they have available to you being that new AC is being installed This is another minium 2-3K.( Electrical panel) BTW how old is this house? Block or wood construction? There is one thing to remember about rehabbing. It all needs to look new!! Not just parts of it. You can spend thousands on ac,paint,carpet ect... but what about the kitchen and bathrooms? During my learning process in construction and doing re-models..I have heard more times then not.. " We should have replaced that too"!! Sometimes gutting the house and replacing everything is cheaper in the long run and WILL add to the re-sale or lease option purchase value. Just my in put.
Kerry
Kerry, I didn't say it was worth 100k now, I said that is what it is assessed as for tax purposes. assessment value is very rarely equal to what it is worth, from what I have been told, it is typically 30-40% less of actual value...