OfflineIVE CAME ACROSS A A REO CHINEDRYWALL PROPERTY THAT HAS BEEN COMPLETED STRIPPED TO ITS FRAMEWORK AND ITS IN ITS BARE STATE. ASKING PRICE IS $99K AND IN THAT SAME COMUNITY HOUSES ARE GOIN FOR $130K-$140K. IT HAS A CDD AND HOA COST OF ABOUT $154MTH. TAXES ARE ABOUT $350 MTH. HOW DO I FIGURE OUT IF ITS A GOOD DEAL I THINK THE REHAB WILL BE A GOOD $40-$50K.
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Use this formula, but you have to first determine the eventual selling price and work your way down.
Eventual Selling Price
minus
Repair Costs
minus
Holding Costs (normally 12-15% of ARV)
minus
Your Profit
equals
Best Offer
P.S. - Everything else is immaterial, irrelevant, and unnecessary.
Thank you so much.
1. First you want to establish the 30 day ARV of the property
2. Next figure the rehab costs...40-50 is not a good ratio. Have a contractor give you an estimate if needed to support that.
3. Take 70% of the ARV and subtract the rehab. That will give you the cost to a buyer or you if you are the buyer.
This largely depends on what you want to do with the property and is it listed on the MLS.
But on future properties we always figure the 30 day ARV x.70 and the rehab cost.
Serenidade,
Based on the amounts you have listed, this property may not be a great deal. Look over the above posts and truly consider what has been stated.
If you are planning on keeping the REO as an investment property, it could cash flow for you in the long run (especially if it is in a decent neighborhood). Get true rehab costs from multiple contractors; find out why property was stripped (I.e., make sure there were no city code violations) if so, clear them up.
After you have completed your due diligence and decided on keeping property, decide on how to recover expenses. Leasing with a separate "option to buy" agreement could be one method to recover expenses. You could keep leasing to families or require 2,000 to 5,000 non-refundable option fee in order to purchase later at an agreed upon price.
Again, decide on what is best for you given the numbers you will have gathered from your due diligence.
Freedom Seeker,
Anthony
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If it is down to the frame you are talking about practically new construction, new walls, drywall probably some new reframing. You are talking about probably more than 60-70k if not more. So unless you get this hm for nothing you should prob reconsider.
Many buyers want light rehab or medium and there are not so many buyers who want to do major rehab's, especially this kind that you are talking about, in my experience at least.
Tony
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