REHAB OR BUST!?

Hi Guys,
Just looked at a rehab house today, but boy, does it need loads of work. Personally, I think it is a teardown, but the rehab guy I met with to look at the house has some great ideas, but maybe there is more money in it for rehab guy than the investor…what is the equation of how much rehab makes sense, vs. DEMO altogether? After 50% purchase price, vs. how much selling price ARV? Is there a good formula to follow? They are asking 170, rehab guy says 50K needed for repairs, I think 80-100 for repairs, can maybe put on market for 170k. Don’t have enough funds to do cash on my own, will have to go thru (additional) investors, if I do it.
Thanks,
REFLA

Did I read that correctly? They are asking 170k for it. When you are done, you think you can sell it for 170k? 170-170 = 0. I must have missed something. Someone please chime in if I am wrong, but I think that means 0 profit and very likely a loss by the time you are done.

As for a formula, there is no universal formula. If you think 10k is worth the work you will need to put into it, then go for it. However, I think you will find that the more experienced investors like to get 30-40k minimum and they price it with a 10k buffer just in case. So if you can expect to get 40-50k in profits when all is said and done, you have a buffer that lets you get out with 30-40k should holding costs increase or a surprise or too comes up.

Actually, according to his post, he could “maybe put on market for 170k” anf they are asking \$170…and it needs somewhere between \$50 - 100K in repairs…

This is crazy…! REFLA – you need to relook your post and adjust the numbers – a lot…this is not just “bust” it is lunacy.

Keith

If he thinks it need 50k and you think 80-100k, well then just assume its going to need 75k and go with that…But unless your doing it for a good deed or somthing, you better be buying the house for 50-75k if the market value is only \$170k…Most people do this to make money. I expect to make 10-15k rehabing houses that only need 7 or 8k into it…if im doing a house that needs 75k into it, i better be making 30-50k. I can do a 6-7k rehab in about a months time working about 20 hours per week. So yours would be looking at probly 3 or 4 months (assuming one or two people). But from the sounds of it, you probably better move onto a different investment here.

SORRY!!! CORRECTION!! It had been a long day! The resale price would be \$270-\$279K.
Thanks for your help!

well, buying it at \$170k and putting \$75k into it, you will have \$245k invested…and thats without your closing costs. Then when you sell it…assuming you use a realtor at 6% commision, you will have about 265k into it. Depending on how much you want to make, lets say you want to make 25k, you will probably need to buy the house for about 145 -150k. (Thats assuming 75k in repairs and selling it for 270k) Hope this gives you an idea. GL

Thank you! That is a great help!
REFLA