I found a house at the end of a cul-de-sac on 1/3 acre that is in very poor condition. It has an atrium in the center of the house. It needs carpeting, floor tile, foundation leveling, new trim throughout the house, bath and kitchen renovations, possible electrical repairs, back exterior of house needs replacing (only side without brick veneer), backyard is piled high with refuse, furniture, dirt, trash, junk. Roof seems to be in good order. HVAC probably needs replacing. Brick veneer and eaves of house seem to be in good order as well as the FP. The tax rolls have it valued at $105,000. IT was built in 1978. The house is 1,980 square feet. Fixed up price should be in the range of $135,000 to $140,000. The house has been abandoned and is now held by a bank. I estimate $60 to $75 thousand for repairs/remodel. The cities Health Dept. has the place secured due to all the stuff in the back yard.
My question: I want to make an offer to the bank and I am thinking of offering 10% to 15% of the tax roll value to take it off their hands and then see if they will finance the amount needed for repairs. Is this a do-able deal? ??? Houston, Texas
You need to get comps. Go to your friendly Realtor and get comps for homes in the same area. These comps need to be for sold homes only.
Sold in the past 6 months. If your a 3/2/2 the comps need to be for 3/2/2’s . Close to the same size Lot’s.
Yes you should drive by the comps and make sure they are good comps.
Now take the ARV and multaply it by .70
Then subtract the rehab cost + 5%
Then subtract the holding cost {insurance,taxes,utilates}
Then subtract the cost of the money
Now what you have left is the very most you you can pay for the house.
Start bidding low. That way if you need to you can always go up.
;D
Bruce
Great formula Bruce and thanks. The house is a 3/2/2 and the comps for the same floor plan on smaller lots is $135,000. Using your formula, my highest target figure is $32,500. This helped a bunch. 
I’m sure the bank will sell it as-is, but I would still get it inspected. Sure they will find a million things, but they might uncover some problems you have not noticed.
I noted you mentioned it has foundation problems…watch out…
this is a big, big project; make sure you have extra cash off to the side in case it takes longer and/or more expensive than planned (becuase it will!!; been there; done that). Also, hopefully you have a good support group (i.e. friends, etc that have some experience at remodel/construction)
aak is giving you great advice about the inspection. The inspector will turn up a “butt ton” of stuff on his/her report but what you really want to know about is the ‘unfixable show-stoppers’. If is saves you several thousand in mistakes, it is $200-300 well spent. On my last house, my inspector found a bad gas furnace. I was able to get the sell to make an $1800 concession (his figure)…the furnace was $900 plus a $15 permit…
Keith
Since this will be a major rehab and you maybe looking to have the bank finance the rehab, you may want to go with a HML as they will give you a grace period before you have to start paying, in many cases 3-6,months. Many times you can get the home rehabbed and sold or L/O or rented in that time frame to start paying the mortage, or then refi the property using its ARV once completed and pay off the HML