Does the 70% rule make sense on lower priced houses?
Hi, I've been looking at properties in the $30-60K range. Some of these need a lot of work. For example, I'm looking at a house on Realtor.com in Charlotte, NC for $27,900 that probably needs the following:
New roof - $10K
new trim - $1K
new gutters - $1K
8 new windows - $3000
Wood floors refinished - $1K
Rehabbed kitchen and its floor - $6K
Just some very basic numbers, I'm looking at $22K in rehab costs, and this is on the low side, assuming that this work isn't as expensive in Charlotte AND the replacements are not high end materials.
The comps are scarce but seem to range from $45-55K, so let's call it $50.
So with the 70%, I'd offer:
70% of $50K is $35K -
$22K rehab costs-
$1000 carrying costs-
$3500 Commission fees & taxes upon sale = $8500 MAO
So this is pretty far from the initial asking price. Is this just a bad deal? I'm still new at this so any insight would be greatly appreciated.
Thanks!