Advice needed on rehab deal I'm looking at.

Rehabbing, Fix and Flip, Rental Properties
1

Hello,

I’m currently looking at a cape cod 3/2 in a nice neighborhood, the owner has walked and listing agent says the bank would likely be open to a short sale per his inside source. I currently don’t have any details on mortgage situation.

The agent says an offer of 75-85k might be accepted, the ARV is a solid 175K min. My GC estimates about 25k for repairs, I think it’s going to be more around 35-40k and budgeting over just in case. There will be very little holding cost as I’m paying cash and self financing the repairs.

I new to this, but I think the numbers look good, but want to get others thoughts… also any advice on shortsales and taxes welcome on this. Let me know if I left out any info needed.

2

The general ‘rule’ is:

(ARV X 60%) - (Repair costs + holding costs) = Max offer

You will need to figure out how long that you will have to hold it to affect repairs so that you know what the holding costs are (PITI, loss of use of funds, utilities, etc., etc.). This is all a part of the cost of doing business.

Keith

3

Does this formula only apply to a rehab/sell or does it also apply to a rehab/rent?
Since not all income or return will be coming from the sale, but also from rent.

*sorry to resurrect an old thread

4

I recommend buying cheaper houses but still in OK areas. You can find houses below 20K that need a little more work. The math works better that way. :biggrin