Pricing The House Or The Lot?
Hey guys:
This property has been giving me some problems for quite some time and I want to know if I should just move on... Let me know what you think. Here are the details of the deal.
ARV of House: 75,000
2 Bedroom 1 Bath/ Frame House
Repairs: 60,000(Only the frame and siding still on house-everything else destroyed.)
Price of Lot: 22,000
Last Sale Price of House: 25,000(in 2003)
HOuse is currently vacant--looking for owner.
I am trying to determine what I would offer the seller. Because the repairs are so HIGH and the ARV only at 75,000, my instincts tell me to price the house as a lot. I calculate sales price as: ARV(.70)-repairs-my profit=offer. Now, if I price this as a lot should I use the lot price as my ARV in the formula and arrive at my offer like that? If I do price it as a lot, shouldn't I try to wholesale to a builder vs a rehabber?
I know this is lengthy, but please help in anyway that you can. All suggestions are welcome.
Thanks!!
[ Edited by results_one on Date 04/28/2004 ]
Hi:
Wow I know that this question stumped me but I had no idea that it would stump all the masters of TCI....
Can somebody take a stab at it?
Maybe everyone is in Orlando....
So give us a clue about the value of the lot. What kind of neighborhood is this. Yes, you essentially have the right formula except that instead of cost of rehab you should subsitute the cost of demolishing the house.
In terms of marketing the house/lot after you own it i would approach both builders and rehabbers. Don't demolish the house until the renovators have had a chance to look at it and see if their estimation of value is different than yours.
I would scrape the house off the lot and start over. This will cost between $5,000.00-$10,000.00. What are the comparables in the neighborhood? I would not pay over $10,000.00 for the lot since you want to wholesale to a builder.
Thanks for the suggestions.
The neighborhood is decent, but I have a feeling I will have to get this DIRT cheap or no one will want to play.
Comparables for the house average around 75,000.
The value of the lot is about 22,000. I got that figure from the tax assessor's office. Since they are usually way off on measuring the value of houses, should I look somewhere else for the value of the lot? If so, where? Is there a such thing as pulling comps on lots?
results_one,
What I do in trying to put a value on a lot is look at the value of the neighborhood and try to determine what a new home would sell for on the lot. Say that in this situation, the new home on the lot would sell for $80K. If you want to tie up the property and then assign to a builder, I would be inclined to say that the value of the lot to the builder would be around $20K. So you'd need to back out your profit from that to determine offer price.