Okay. i’ve been looking into REI for a while now and I’m ready to get started. im currently renting though, so here’s my issue
a work colleague approached me about her home she needs to sell before losing it. this 5br 1bath single family in baltimore appraised at 178K as-is with $12K-15K of repairs needed. with those repairs it would be valued at 198K according to the appraisal. with a finished basement and an additional 1/2 bath it might go for even more of course. the location is desireable. I currently rent an apartment outside of the city and would consider buying this as a primary residence only after the work is done. I would love to buy it as an investment property to rent or sell but Im unsure about whether renting would be worth the net $300 a month or if I could sell it in decent tiime since things seem slow. I welcome your thoughts.
I am currently battling a similar issue…I bought a house I know I can make 250k on… Problem is that my wife loves the house… And I love my wife…
After doing a lot of calculations I have determined that it’s cheaper to keep the wife happy and not sell the house for profit… It was a close call but when I put a finely sharpened pencil to it the wifey won out.
I know I am making light of your situation or question it’s just that I am trying to illustrate that we are investors first… Home owners second… Unless you’re married to my wife…
I would buy Subject tot he existing loan advertise the house as a handy man special not doing any of the work and resell the thing…
There are going to be so many opportunities for you once you gain the experience to buy and sell that if you keep this one you may stifle your education and investment career.
Just a little warning… I don’t know your area but is five bedrooms normal with only one bathroom… Could that be a negative in the minds of a potential buyer?
Anyway good luck with your newly found career and I am sure I can speak for many others when I say we are here to help…
thanks for the advice. I was thinking about the sub2 option. could you walk me through how that would work? does that help the sellar as well?
it used to have a 1/2 bath on the main level that was turned into a walk-in pantry. the plumbing is still there and could be returned to a 1/2bath im sure. but you’re suggesting NOT to do any work? I’m unsure how I make any profit if i dont do any work. thanks for the support. my wife doesnt want it until its updated so im good on that end.
The numbers not making sense to me… You are buying it at 178k, needs $12k repairs, and it will be worth $198k? if so, then this is a terrible deal to both live in or rent.
Sinking in $12k to make $300/month above your debt is not a good investment strategy because vacancies, repairs,…etc will eat it up quick not to mention you will need years just to recover your down payment and repairs.
Oh, let me clarify. it appraised 2 months ago at 178K, I will be interviewing the owner later today, but i learned that the current loan balance is 80K. what do the numbers need to look like for this to even be considered? Im sure the seller wants to walk away with something, but I will keep looking if it’s not worth my time to pursue. thanks again.
Do it subject too… Offer the owner 100K and you cover closing cost so they can walk away with 20K. Do the repairs, carry the home and then sell it.
Buy for 100K +12K for repairs = 112K… Holding cost for 3 months about 2500 a month = Total investment of 114.500
List house for 180K with 3% towards closing cost on full offer acceptance.
180K- 5,400+ 174,600 = 114,500 = 60,100 proft…
Now of course seller may not like that 100K offer… So offer to give them 20% or 10K max from sale of the home when you get rid of it…
Just be creative… You have equity in there if they only owe 80K and they are motivated. Let them know the house is a junker and this is a buyers market. Many people also do not want to do rehabs as an enduser since so many nice homes on the foreclosure market. Home is a dump so price needs to be low… 60% FMV is max you should consider.,
2 stories and a basement, and the only bathroom is on the top floor?
We are talking about an extremely hard sell on this one. It’s going to cost you more than $12k to install a bath on the grouund floor and one in the basement (which you will need if you are going to finish the basement.
I would not recomend a 5 bedroom as a rental. All you get are an enormous number of kids, huge blended families, or stacking. With any of those, your house will be torn up in no time.
I think your estimate for repairs is way off if you intend to flip it.
I don’t even think you could rent out a house with 3 floors and 1 bathroom. Especialy not to your target tenant of a family with 8 kids. They are going to think about 8 kids and only one bathroom, and they are going to go and rent elsewhere.
If you can live in the house like it is, another option is to get it at a really good price and move in. Live there for a couple of years while you fix it up. Sell it after you have been there for 2 years so you don’t have to pay capital gains on the profits.