I Think I Finally Found The Right Forum! For This Deal..
I've got a property that is listed at 125K which has lots o' problems. I had a contractor go to the property and give me some quick estimates. For all work it could be done for 30K but he didn't feel comfortable giving that quote to me because I told him I HAVE to have this under budget (no surprises). He said 50K would cover everything even the surprises. Now when I talk about surprises it is mainly water damage from a leaking roof (its been leaking for 8 years!).
The sellers owe 92K and are willing to take 92K plus some moving money. The comps would fall 150-160K for a complete rehab. My question is this... Is this a situation where taking Sub-to is appropriate??? I am getting another quote from another GC later this week, if 30K for repairs is reliable and I can get them to sell for 92K w/ the resale at 160K; thats 30+K profit. Am I missing something here or am I about to jump the gun to get my first deal...any help??
[addsig]
Say you give the sellers 95k, and to split the difference, it costs 40k to rehab it. You have $135k in it. Lets also take for a moment, since it has rained in the house for 8 years, that there is almost definately going to be MOLD. Did the estimate for repairs include mold rehab? Remember this word when dealing with mold, KILZ. Your contractor should know what it is.
Now to continue, Say the FMV is 150 - 160k. Lets say the home sells for $150 net to you. IF this goes down you could make 15k. But I would be absolutely sure about the contractor estimates. That water damage, will go through the ceiling, rot the wood, insulation will mold, drywall will mold, etc.
I am not the sub-to guy, yet.. hopefully $CASH$ will chime in and correct me if I'm wrong, but this isn't a sub-to kinda deal. More like a short sale, except the owners are not behind on payments or a straight up rehab project.
I cannot over emphasize MOLD enough. When sold you have to disclose that this was a mold rehab to the buyers. And when you start rehabbing, I will bet you will find more than expected, and possibly structure damage from the water, but hopefully not.
I have done quite a few rehabs and have found that it ALWAYS takes longer and costs more than what you think...
When you start tearing into things, is when you find the problems. Mold is a concern...
Good luck
Thanks for the replies, I am going to probably pass on this one since I don't want to get near the MOLD issues. But I did find another investor last night in my area that does rehabs himself and has a lot of experience. If he is interested I will try and get a finders fee instead of trying to split profits. I think this is a safer bet...being a rookie. Thanks again for the help/advice. This is definately a great site and resource for new and old investors.
[addsig]