What a property is worth without getting it appraised? I know lets say how much is owed and comps, but how do I figure out if it needs repairs, etc. Because to my untrained eye, everything looks fine? I am sure other newbies are wondering the same. Thanks in advance for the help.
For one thing it’s not an exact science. Also an appraisal won’t find everything wrong with a property and inspectors don’t claim to catch everything either.
Success in anything requires working with good people, real estate isn’t any different. Find a person who knows how to evaluate a property. It could be a contractor, a property inspector, or just someone who has been doing rehabs for a while.
I hired an inspector on the first 2 deals I bought and it taught me a lot and made me feel more comfortable with my purchase.
dpinnick,
You’re going to need someone there who can estimate cost of repairs. That would be a contractor in your case. Atleast the number will be coming straight from the horses mouth. If your talking about rehabs, you really need to know how a new house is built and how old houses used to be built. You don’t have to know all the tricks of the trades, just a general overview. After you make an offer, have the property inspected and follow the inspector around asking lots of annoying questions about every little thing.
If you don’t know the difference between something in great condition and something in terrible condition, get to learning before you attempt to buy a property. Some contractors will recognize they are going to get paid by someone who doesn’t know to screw in a lightbulb and before you know it, they’ll be driving a brand new Benz that you paid for. Just because your a newbie doesn’t mean you have to go into your first few projects blind and dumb.
When you know what it will cost to repair, subtract that from the ARV (obtained for free from an agent), then figure out your soft costs mine usually run around 8% of the ARV but that is without ordinary financing rates. Subtract your profit criteria and you have a maximum offer.
ARV
- Renovation
- Soft costs
- Minimum profit
= Your maximum offer (What it’s worth ‘as-is’ to you)
- The mortgage balance is irrelevant to the properties value.
You have to know the value first and foremost. If you can’t tell how much a property is worth in a neighborhood, you’ll be just wasting time and money.
As what have been mentioned earlier, your repair cost and to whatever is the value of a certain property are completely independent from each other.
Of course the end result of whatever that property will look like will be the resulting market value of that home. More than likely it will be more than what you have paid for it.
It is highly recommended that you hire a licensed home inspector in your first home purchase and go along with that inspector. You will be amazed how much information you will learn from these guys.
Before you hire a contractor, check them out with the BBB. Also, check out the buildings department to check out what violations they may have with other jobs they have done. If they have a small amount of violations, that’s fine. But if they have an excessive amount…beware. One thing that I noticed with people in general, is that they look at the finished product and see if the paint is ok and everything looks fine on the outside, they feel that everything else is fine. If you are doing rehabs I suggest that you check out the job site often. Because I personally know contractors that do an ugly job behind the walls. Once the walls are up you will never see it. The end result is a bueatiful appearence with a decayed interior. I’ve been in construction for 15 years and the horror stories I can tell you. Another thing I can advice is just because the price is cheap doesn’t mean that the work is as good as the more expensive one. You get what you pay for. Usually when the price has a large spread and all varibles are the same, the contractor will have to find ways to cover the differenece. This means they will try to cut cost with material (cheaper quality and used), wanting to rush the job which hinders the workmanship, and lower wages to employees, which creates unhappy workers that try to find ways of getting even with their employers. Usally in performerance and material missing. Which effects you in the long run anyway. Overall not all contractors operate that way, just keep that in mind. Look for someone who has pride in their work and ask them alot of questions.
thanks for the help, 
I have no ptoblem asking many questions and I will definitely do that. Now, I just have to find a good contractor & inspector to work with. ;D