here’s a little update for everyone. i visited the home and it turns out that EVERYTHING needs to be replaced. The kitchen, batroom, all sheetrock needs to be replaced and painted, the rug, new windows are needed, the porch, the siding, maybe the roof, certain steps and parts of the home need new wood because it’s rotted. the sellers are facing foreclosure in 60 days. im trying to analyze everything to take necessary precautions and to come up with an offer price. as a side note, i will be doing the landscaping, sheetrock and painting…the kitchen, bathroom, siding, porch (maybe roof) will be outsourced.
plan:
-estimate the total cost of repairs.
-add in profit i’d like to make from the deal
-tack on the sewer assesment (we are not sure of how much this is but it can be as much as $20k)
-add in other costs (closing, etc.)
-subtract this number from the ARV which will be our absolute highest offer
-offer $10k below this to leave some room for negotiating (if they accept we get it even a better deal)
concerns:
-right now i’m planning on fixing basically everything, however i understand that there are some things which don’t increase the value even if fixed. anyone have any thoughts on what these might be?
-we figure roughly the ARV will be about $300k (the list price is $215k by the way), however the market seems to be changing where we live (homes are on the market longer) so this will obviously affect our profit if we plan to sell in about 6-8months. how do we factor this in?
-even if this deal would profit me only 10k, i’m still interested. my partner (father) says $10k is not enough profit for him to invest $200k along with labor. obviously this is a personal choice, but is he right in the sense for someone doing the rehab and not wholesaling the deal…you should profit more than 10k?
-income tax and capital gains also concern me a bit. as of now, i don’t plan on living in the home for a full 2 years. i know some people use a 1031 solution to defer tax, however if there isn’t another deal in which would make a 1031 a good option…i’d like to know some other options i have so that my profits won’t take that big of a hit
-i’d like to get more accurate numbers estimating cost of repairs. i will not have enough time to get individual contrators in there to give me estimates. we believe a fast closing from offering cash will be enticing enough to seal the deal before a bidding war starts. how can i get pretty accurate repair estimates in a short period of time? i don’t want too general estimates here because it could turn out costing me money.
…i apologize for the poor grammar or scattered thoughts. i have a ton of ideas racing through my head faster than i can type them. please feel free to add on, correct, etc. any of the assumptions or concerns i have. also, i there’s anything which i’ve neglected to address, feel free to point that out as well.
a possible first deal we’ll see how it turns out ;]
edit: according to the title company, the land was assessed at 179k