Rehabbing without Closing/Holding Costs

I have bought, rehabbed and sold 4 investment houses on Long Island over the last 5 years, My partner is my brother-in-law who does all the work so the rehab costs are manageable. However, the buying and selling closing costs as well as the holding costs in such a high tax area eat up the majority of profits, for homes that I have no intention of ever occupying.

So I wanted to see if anyone has tried to make a deal/contract with the seller/owner to do a rehab on their home and spilt the profits of the higher priced house?

For example, for a recent project of ours we bought a house for $300k and after putting in about $40k of rehab (based on my brother in law’s family discount) we sold the house for $430k. However, we held it for a year longer than we expected (we sought a much higher price initially) and the buying and selling closing cost made this essentially a break even proposition for us.

So based on my idea and the above example:

$300,000 Initial Home Price

$430,000 Selling Price
-$40,000 Rehab Costs (recouped by us from sale)

  • $20,000 Closing Costs
    $370,000 Net Sale Proceeds

$70,000 Profit, which we split 50/50 with the homeowner.

This approach differs from an option contract as the seller has upside (the splitting of profits on the higher priced house) and we save one side of the closing costs and all of the holding costs.

Any opinions/comments would be welcome.


This is how I see this:

$300,000 purchase price
$ 6,000 purchase buyers closing cost
$ 40,000 Rehab cost
$ 13,500 Carrying cost 120 days (3 Payments)
$ 2,200 Overhead (Utilities & Insurance)


$430,000 Sale Price

$ 26,000 Realtor Fee’s (6% Listing & Selling Commission)
$ 10,750 Closing Cost includes Title Insurance (2.5%)
$_______ Transfer Taxes (If Applicable)



$361,700 Cost

$ 31,300 Profit

Now if FMV (Fair Market Value) is $430,000 30% = $301,000 $61,700 Rehab Cost = $239,300 Purchase Price

So if you paid $300k for this property you over paid by $60,700 dollars more than you should have paid, so it is no wonder profit margins are thin as you paid to much for the property!

If you can not get it at the right price, pass and go on to another property!


I think the state laws are different for different state and that’s why there may be some variation in process so i thin you must contact any legal person if you had any problem with the documentation and other procedure that you need.

Gold River is absolutely correct. It is harsh, but you have over-paid for the amount of work you have done.

Tell us how you found those 4 houses. Were they in the MLS? Did you pay cash or obtain mortgages?

The original idea (not your NEW seller/buyer idea) is very good. You and your brother-in-law have formed a good team. Now you have paid some learning curve dues, and it’s time to make some real profit.

There is a show on (?) HGTV about 2 former college roommates who do “Renovate to Rent” and another about a young husband/wife team in Southern California who bid at auctions and fix and flip those houses. Both of those shows demonstrate how critical and essential the original pre-purchase analysis is. Watch those shows–it is inspiring homework for you.

In my opinion, this is what you need to work on. You need to be buying directly from don’t want 'er owners, from out-of-area heirs, from people burned on bad renters.

You need to look, look, look at many prospective deals. You need to use that hard-won cash to strike when it is right. You need to come on this site for advice when you get a hot deal.

You need to make a killing profit next time, because you have earned it.
Good luck, and let us know how it goes.