What should I do with this property?

Question

I got a property from a tax sale for under $2,000 all in. It needs a lot of work, about $33,000. The ARV is about $45,000 and market rent would be $625.

If this was your property would you:

1. Rehab and rent it out
2. Rehab and sell
3. Sell without rehab
4. Other option I haven't thought of yet

Thanks for the help.

Steve Babiak · Answer

Sounds almost like a NEFF (not even for free) property ...
Now you know why they didn't bother with redeeming the property.

Gerald Levin · Answer

I totally agree with Steve above 
"Sounds almost like a NEFF (not even for free) property"
You are appx an hour away. Going to need tons of work and supervision. I would try to sell it, as is, for a profit and move on to the next deal.

Account Closed · Answer

Thats a good area Kyle.  Sounds like a total rehab.  You shouldn't pay no more than $20k max on this rehab material and labor.  What is the sq footage,  how  many bdrs, baths, garage?

Kyle Meyers · Answer

New roof, windows, siding, doors, flooring, drywall work, furnace, plumbing, and electrical. I am going to get more quotes for the roof, windows, and siding, to see if I can bring those prices down. This property is actually in New Castle, about  an hour east of Indy.

Account Closed · Answer

Kyle,  what exactly are you getting done to the  house that runs up to $33k?   Indy is my yard! what area is it in?  I would do like Andrew said and list it for sale.

Kyle Meyers · Answer

33K is the starting point on bids and estimates. I am looking for cheaper labor now to bring down the price. I think I will go with the rehab into a rental option, but I have to bring the cost down so it is a good investment.

I knew about some of the exterior damage, but couldn't get inside the property until I owned it and somewhere between the time I bought the lien and when I got ownership it looks like the former owner moved out and vandals moved in.

Stanley Crawford · Answer

Does it really need 33K worth of work? Can't you do some of it yourself?  Licensed Contractors are great but really not needed for every part of the job. "Good OLE boys" can do many thing just fine and A LOT cheaper.

Andrew Jones · Answer

33k sounds like a lot of rehab.  If your an experienced rehabber maybe rehab and sell if your not try to sell without rehab for 5k and get a quick 3k.

Another thought would be to do a tear down and lease the land if mobile homes are allowed.

Nathan Emmert · Answer

$10k profit would be eaten pretty quickly selling it and there's not enough meat on that bone for anyone else to buy it short of the rehab.  The problem on option one is your return on investment sucks.  Spending $35k to make $4,000 a year isn't a great return (less than 12%).  I would rehab, refinance, then rent.  Get some cash back out of the deal.

What should I do with this property?

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