Offlinefirst property under contract!!! This house is a 3BD/1.5BA 1752 sq ft single story. It was built in 1933 and is in the historical district. It was originally a duplex so it has two kitchens. I am wanting to buy, fix, and flip. I would have to upgrade the electric panel, replace roof, replace appliances, add a window unit, fix a pipe that has come apart under the main kitchen sink, replace some storm windows and the light sockets in the house which are two prong and not grounded. Replace some wood rot on the outside and cover the corner pockets of the house And of course the usual paint inside and outside. Need to change out to three prong sockets and ground them. Want to add shower to second bath to make it two full baths, make second kitchen into a wet bar, and convert the stove and hot water heater to electric since they are gas. Some say leave them gas. Any comments/ suggestions are welcome since this is my first deal.
Some say I should assign and others say flip or rent. What are your thoughts? I have until May 22 to make a decision. Thank you for all of your input
Laura
If this is your first property on contract (1st deal?) then I recommend for you to wholesale it -- easier and profit comes faster. Another thing is if you have not done any rehab before, there will be a lot of learning and pitfalls that you have to be aware of.
Since you already have it on contract, I'd say, advertise it on Craiglist. You can also offer it to advertisers who are looking for deals.
Hope this helps.
Thanks,
Dan
You may have to upgrade more than the electric panel. Built in the 1930's, you may have knob and tube wiring, and you may have to rewire the whole house. Knob and tube wiring only has 2 leads, hot and neutral, no ground.
you may want to work the numbers on the fix up here you might be getting into more cost than you think.That electric can get you into some very expensive cost you will have to replace the wiring to and bring it up to code( it can be costly) then decide if you want to go a head and hold or wholesale, check the cost on everything.Much success, Jim
jbischoff
Hi Dan,
Thanks for the advice. How much over the asking price would you list for just out of curiosity? I don't want to over ask just get back what I've put in and pay realtor commission. Thanks, Laura
Laura
Hi Thomas,
Thank you for the knowledge on the wiring and electrical. Need to know info is awesome.
Laura
Laura
First possible deal. 2 family flat. Cannot use my credit of lack up. Renter just moved out for non-payment. Mortgage owed 25,000. Seller want 30,000. Appraise at 52,000. She wants 6,000 down. Built in 1909. Owner lives in downstairs and want to leave state, Very motivated. I am concerned about electrical update. How do I write the lease option contract? I think she will leave with 3000 and if I can put the payment in escrow(not sure how) so that she will have nothing to do with the payment to the finance company and the house in general. She really does not want it in her name but I cannot put anything in my name right now.
My family could move in the house or rent it out all or part. We are ok where we are but can pay the rental money to the finance company if it will be of benefit to us. Her payments are 300.00 a month on her loan.
PLEASE HELP ME MAKE THIS DEAL, SHOW ME HOW TO WRITE IT UP ONE TIME. PLEASE.
Sorry for not answering you back right away.
As far as the listing price, you don't want to loose money. In fact, they say you make your money going in -- meaning, you should already know how much you will make before you offer to buy. Since you already have this going, I suggest you run your numbers. Add up all your expenses (including, rehab, closing, holding and other costs), then add your profit to your buying price and that would be your minimum listing price. You can also add another $5K - $10K to give room for negotiations.
Hope this helps.
Thanks,
Dan
Hi Dan,
So it looks like I will be closing on this property next week if I can get my IRA closed out and get fix up money. I am meeting with a banker to see what they will offer me for a rehab loan.
No one seems to want it so I have to do a little TLC before anyone will consider it.
Thank you for your valued input. I appreciate your advice. I will use this formula when I do the fix up and turn around and sell it.
Laura
Laura
What kind of numbers do you have on this property? Why does "no one seem to want it"? RED FLAG! If your numbers are right, someone ALWAYS wants it! Don't close just because you don't want to lose EMD if your numbers are wrong or you will stand to lose MUCH MORE than the EMD!
How much is the rehab going to cost?
What is the ARV?
What is your exit strategy?
If that one doesn't work, what is your second exit strategy? Always have two exit strategies.
You certainly don't want to get it just to get your first deal and be stuck with overpaying and lose money!!!
One of the points that Matt emphasized at The Edge was start by wholesaling! Not rehabbing! Build up cash and learn what you are doing first! After you have done a LOT of wholesale deals and mastered that, move to rehabbing or "flipping", then buy and holds.
Good luck in what ever you decide.
Karen
"You're never too old to be what you were meant to be!"
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Hello Laura,
It's exciting to get an offer accepted. However, I don’t see anywhere in your posting where you listed the amount of your offer, the ARV, estimated rehab costs, or what you may have already paid out in earnest money. Have you run the numbers as it’s been suggested earlier? We’d be much better able to help you if we knew what all of those numbers are.
The “Need to change out to three prong sockets and ground them” Has already been covered well earlier by Thomas. But also…Replacing the roof, adding electrical service for a stove and adding a shower are all big jobs as well. Additionally, wood rot can be a lot more extensive than what you see on the surface once you start pealing the siding off.
I’m not sure how extensive the other things are but you should really dig in and get your hard costs listed out before you close on this one. I think that Karen has an excellent point about the EMD. Better to lose a little now than a lot later.
The initial questions that should always be asked with any rehab project that you’re looking into placing an offer on are;
*what is the estimated After Repair Value? (ARV)
*what are the total rehab costs going to be? (all labor and materials)
*how quickly are good condition homes selling in this neighborhood?
*how long will it take to get the property back on the market?
*how much is my own time worth to me?
Then you can be sure that the offer you make will net what you need.
You’ll also have a better idea of what your final asking price will need to be to make it all worth it to you.
As Dan said earlier, you make your money going in.
You still have a couple of days left before you need to close this deal. If you’ll let us know what all of the numbers are we can help you make sure of whether you should follow through with this one or not.
Michael
"No one can be truly successful without helping others to become so as well"
Hi everyone, so the property still belongs to the seller. Two things happened. 1. My survey was due at close which was Thurs. Surveyor is still working in it bc the only survey ever done was in 1933 when it was built. I will pay him when he completes it bc I believe in paying someone for their service. 2. The banks wouldn't loan me rehab $. I had the 61k to purchase but not the rehab $. The ARV was $120k, purchase was 61k, and my rehab cost was gonna be $30k. EMD was $500. Inspection was $180 and survey will be $488. But it's all good. Everything happens for a reason and I have learned a lot with this property. Thank you all for your pointers and tips. Now, I'm off to look for the next deal.
Laura
Here's one thing I have noticed about your posting that many. Did not mention when discussing the deal....
Every state, and every county will vary ( but in NYC) historical districts are very touchy areas for rehabbing as I learned in school (I am slowly getting out of that mind set) some counties will prevent you from making certain changes to homes deemed a landmark (if classified as such) because they want to retain the look of the area the home is in..... Furthermore some incentive may be there if you are allowed to make certain changes ( in terms of electrical arrangements ) My sister lives in such an area and her building is deemed as such and she gets a break on electrical costs because of it. (Great marketing tool by the way! )
Some say I should assign and others say flip or rent. What are your thoughts? I have until May 22 to make a decision. Thank you for all of your input
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Watch your words, for they become actions.
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Watch your habits, for they become character.
Watch your character, for it becomes your destiny.
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Our Heart's Desire must be nurtured by our mind,to give birth to common sense, that will enable us to seek out the path less traveled, with the greatest Personal Growth. -J.R.-
Hello Laura,
I have done lots of these older homes...
Have you gotten a firm quote from a contractor for all of the work (including updating the electrical) - if it's knob and tube, you can't sell it to someone with a mortgage because it's UNINSURABLE (Insurance Companies make fires due to knob and tube wiring not covered).
What is the FIRM quote from your contractor for everything? If it's more than $30k, the margin is too thin for a fix and flip... $61k purchase, and if reno becomes $40k, selling for $120k (10% for closing / realtor costs = $108k at close) means $7k profit... but if reno truly is $30k, $17k profit isn't shabby.
I'm doing a deal where my Purchase is $54k, Reno $20k, ARV is $110k ($99k at closing, $25k gross profit). I'd be happy to split the profit with anyone bringing the $74k to the table... maybe you could partner with someone to get 1/3 the profit to bring $30k to the table...
Also, network with HARD MONEY LENDERS - you'll find them at local real estate groups, look for 12% & 2 points and see if they're willing to lend the rehab $. They will also tell you whether a deal is good enough... if they won't lend you rehab money BACK OUT... if they don't think it's safe enough (especially a rehab only loan) then it's a dud.
The key is EXACT NUMBERS - NO FUDGING... it has to be a firm quote with a Scope of Work that encompasses everything...
Hope this helps!