I need opinions on a ranch style SFH for rehab.

I need opinions on a ranch style SFH for rehab.

CA · Member since 2018 · 5 posts · 0 votes

I am starting to get into real estate investing. There is a 4/2 1900 sq property that has piqued my interest. I can probably get this property for about $178k and the ARV range given by zillow is from $217k to $302k. The main work needed on this property is replace the flooring, update fixtures, paint the walls, clean up the pool and the outside. I expect these improvements to cost no more than $40k. Using comps I get an average price of $258k for the area. Does this sound like a reasonable rehab? The next information is extra and I don't know if I should add but, methamphetamine was cooked in this home and a person died on the property as well, so there is the possibility of drug residue inside the home. Does this still sound like a good deal, and if so should this history be shared with potential buyers? I appreciate any opinions. Thank you for your time in advance.

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  • Rental Property Investor · Augusta, GA · Member since 2017 · 825 posts · 278 votes
    8y

    Hi Ulises,

    The meth lab is very important information. You need to talk to experts on the clean up costs of meth- they could be huge. Personally, I would find another deal, but this could end up being your specialty, if you wanted. Considering the house's issues, I think you should offer significantly less than $178.

    The usual wholesaling formula is (ARV- repair expenses)*.7

    You want to get it for 70% of its value, minus repairs. Good luck!

  • Member since 2018 · 24 posts · 16 votes
    8y

    California is yet to update it's meth clean up page, but it does seem to contain a contamination level of 1.5 micrograms per 100 square centimeters as a standard for presumably the max amount of residual methamphetamine.

    https://www.dtsc.ca.gov/SiteCleanup/ERP/Clan_Labs....

    For cleanup, there are lots of other state sites, e.g. OK:

    http://www.deq.state.ok.us/lpdnew/MethLabs/meth.ht...

    Seems like you need to air out the property, then maybe close it up and turn off the AC for a few days to get any remaining volatiles to evaporate, then air out again etc. and clean all surfaces and the vents/ductwork.

  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    8y

    In order to answer the question . You need to access what exact damage is to the property from the meth.

  • CA · Member since 2018 · 5 posts · 0 votes
    8y

    Thank you Amanda, Dave and Jo-Ann for your responses. I have though about this property a little more. As a rule of thumb I should use the 70%  rule. With this I should expect to pay around $155k in order for this rehab to make sense. This is not taking  into consideration any repairs due to the drugs. I have seen pictures of the inside but I don't know if any chemicals seeped through the walls. I think I will look at some other opportunities and stick to my early venturing in RE with a little more straight forward scenarios. I greatly appreciate any and all opinions and ideas.  I will definitely look forward to asking any questions I will have in the future.

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