I found a 2 unit (one building) REO. The agent gave me a prelist price of 98k and it needs about 100k of work due to fire damage, roofing and foundation issues. The first unit is a 3/1 785ft, and the second unit is a 2/1 600ft.
I don’t know how to calculate on ARV on multi-units.
Can someone help me on how they would approach determining the ARV on this?
The ARV is going to be a combo of a couple different things. First, you need to know what the going market rate is for comparable properties in the area. Secondly, you need to determine what the units will rent for when the project is completed so that you can perform a cash flow analysis on the property. Determine what your maximum allowable offer will be based on how much cash flow the property can produce, and don’t forget to factor in ALL your costs, including rehab costs, carrying costs, utilities, advertising, etc…
Get your own estimates for repair costs. Don’t trust the agent’s figures. Burned buildings can cost a heck of a lot more to restore than you’d think just by looking at them.
It’s possible that if the building needs new foundation, new roof (agent’s words), all new wiring (and it probably will after a fire), all new plumbing (and it probably will after a fire), all new wall board (and it will to get the smell of smoke out), some new wall studs (because some of them will be damaged), all new flooring, new cabinets (which it will to get the smell out) that your building is pretty close to being a tear down.