I’m looking at a HUD home with an asking price of $53,000 and $4,500 in escrow for repairs (primarily siding) for an as is price of $48,500. I went through the house with my realtor and detailed all the items that need repair. I then went to Lowes and priced all of it. The house also needs a roof (tear off because multiple layers). So, I had a roofing contractor give me a bid at $3,100. Combine the $3,100 with my estimate for other repairs for a total rehab cost of $8,448. I added another $800 for cost overruns. I figure 3-months to rehab and 3-months to sell. Six months of taxes and Insurance of $500. Closing cost of $1,500. Interest on loan of $1,575 (based on $45,000 @ 7% for 6-months). This gives me total rehab cost and holding cost of $12,823. I figure I should make $10,000 profit. My realtor completed a market analysis for me and after rehab the house should sell for $60,000. I will have my realtor sell for me so I will have 6% commission. With all these figure I come up with a price I’m willing to pay for the house at $33,500. This is approximately 70% of the as is price. My local bank is willing to finance 100% of purchase price and rehab cost. Have I over-looked anything? Does this look like a doable deal? Does this look like something HUD will go for? (but then again if HUD doesn’t go for it I’ll walk away and look for the next deal).
Sells price after rehab $60,000
6% commission (3,600)
$56,400
Rehab cost ($8,448)
Overrun ($800)
closing cost ($1,500)
Interest on loan ($1,575)
Taxes ($250)
Insurance ($250)
Profit ($10,000)
Amount willing to pay for house $33,577