I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

@Sheri Lowrance It's tough to gauge if you are doing anything wrong from the information provided. The two main numbers that can sink your plan are the estimated rehab costs, and ARV.

So... How confident are you in those two numbers?  Where did you get the rehab cost estimate from?

Originally posted by @Sheri Lowrance :

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

 You have the right idea of trying to know what it will sell for when finished though you won't know for sure until the day comes. I look for 3 similar properties that sold in the last 3-6 months within 1/2-1 mile radius for comps. 

Total gut and rehab takes time. Since I don't know the property it is tough to guess what you might run into and what the costs of rehab are. On a project that size I always assume I need to be onsite each day to be sure the contractors show up, to keep them moving forward, to answer questions about unforeseen surprises. 

Select finishes that are at the same level or slightly better than the houses that are selling around you. Don't over build. Check and see if the converted garage was permitted or do you need to get permits to convert and will they even allow that. 

There seems to be enough meat on the bone to cover for most mistakes you will run into. If the market for houses in the areas is going up some that helps too.

As for the numbers: I break everything down to the cost of the wire for the rewiring, the cost of the copper line for the replumbing, cost of the sheet rock and on and on. It's a good exercise because I catch some of the things I missed on the first walk through. If you are using a general contractor it's harder to figure your costs. They always come back in the middle of the job and say "we ran into a problem and it's only $7,000 more to fix". Lol It's best to be your own general if you can find the time.

But, with the info you have provided I'd probably seriously consider doing the flip if I believed the market would support the sales price of $370,000.

Originally posted by @Matthew Irish-Jones :

@Sheri Lowrance It's tough to gauge if you are doing anything wrong from the information provided. The two main numbers that can sink your plan are the estimated rehab costs, and ARV.

So... How confident are you in those two numbers?  Where did you get the rehab cost estimate from?

I don't yet have this under contract. My friend is trying to figure out if they can do a buy, rehab, and hold on their own. They've never even educated themselves yet on real estate investing. So, I was trying to come up with an amount I could pay them to give me the deal. I told them $10K or 9% of profits,or a combo of these. I would still need to do a walkthru with a GC and get their actual estimates and gather more data myself. So right now, these estimates are VERY rough. I am VERY confident in the minimum ARV though.

Originally posted by Account Closed:

Originally posted by @Sheri Lowrance:

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

 You have the right idea of trying to know what it will sell for when finished though you won't know for sure until the day comes. I look for 3 similar properties that sold in the last 3-6 months within 1/2-1 mile radius for comps. 

Total gut and rehab takes time. Since I don't know the property it is tough to guess what you might run into and what the costs of rehab are. On a project that size I always assume I need to be onsite each day to be sure the contractors show up, to keep them moving forward, to answer questions about unforeseen surprises. 

Select finishes that are at the same level or slightly better than the houses that are selling around you. Don't over build. Check and see if the converted garage was permitted or do you need to get permits to convert and will they even allow that. 

There seems to be enough meat on the bone to cover for most mistakes you will run into. If the market for houses in the areas is going up some that helps too.

As for the numbers: I break everything down to the cost of the wire for the rewiring, the cost of the copper line for the replumbing, cost of the sheet rock and on and on. It's a good exercise because I catch some of the things I missed on the first walk through. If you are using a general contractor it's harder to figure your costs. They always come back in the middle of the job and say "we ran into a problem and it's only $7,000 more to fix". Lol It's best to be your own general if you can find the time.

But, with the info you have provided I'd probably seriously consider doing the flip if I believed the market would support the sales price of $370,000.

 Thank you very much, Mike!

@Sheri Lowrance just a heads up that we were looking at a property near old town Arvada a couple weeks ago- 3/2, ~1400sq ft. It needed mostly cosmetic and a little more, listed for $375K. They've since dropped it to $359K. 

Do you have a realtor you can talk with? Wonder if you have a friend of someone you know that's a realtor that can run the CMA for you. You may end up selling with them so it's worth their time!

Originally posted by @Sheri Lowrance :

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

 Looks like a great deal on paper. $150k seems like a sufficient rehab budget for something like this too. I'm familiar with that area and I think the appreciation upside is tremendous, so I'd be tempted to keep it as a buy and hold for this reason if I were you. Maybe do a less expensive rehab, just enough to hit your target rent but not using high end materials that you would use for a flip (durable rental products like LVP flooring and Laminate counters instead of bamboo and granite for example). If you could be all-in for mid 200's and get $2k in rent those are nice numbers for this area, and in just a few years your appreciation should be significant.  Just spit-balling different strategy ideas here. You could also probably wholesale it/sell it quick to a flipper and make close to your projected $75k profit without doing anything. I might actually go that route, just turn around and sell it; much less stress, risk and effort. $100k for anything in Old Town is a smoking hot deal, get that baby under contract!

Originally posted by @Marjorie Patton :

@Sheri Lowrance just a heads up that we were looking at a property near old town Arvada a couple weeks ago- 3/2, ~1400sq ft. It needed mostly cosmetic and a little more, listed for $375K. They've since dropped it to $359K. 

Do you have a realtor you can talk with? Wonder if you have a friend of someone you know that's a realtor that can run the CMA for you. You may end up selling with them so it's worth their time!

Thank you very much Marjorie! I will definitely get a more accurate ARV with a realtor if it looks like I will be assigned the contract.

Originally posted by @Steve K. :

Originally posted by @Sheri Lowrance:

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

 Looks like a great deal on paper. $150k seems like a sufficient rehab budget for something like this too. I'm familiar with that area and I think the appreciation upside is tremendous, so I'd be tempted to keep it as a buy and hold for this reason if I were you. Maybe do a less expensive rehab, just enough to hit your target rent but not using high end materials that you would use for a flip (durable rental products like LVP flooring and Laminate counters instead of bamboo and granite for example). If you could be all-in for mid 200's and get $2k in rent those are nice numbers for this area, and in just a few years your appreciation should be significant.  Just spit-balling different strategy ideas here. You could also probably wholesale it/sell it quick to a flipper and make close to your projected $75k profit without doing anything. I might actually go that route, just turn around and sell it; much less stress, risk and effort. $100k for anything in Old Town is a smoking hot deal, get that baby under contract!

Great point, I definitely will consider that!  I sure hope I get this deal!  Thanks, Steve!

Originally posted by Account Closed:

Originally posted by @Sheri Lowrance:

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

 You have the right idea of trying to know what it will sell for when finished though you won't know for sure until the day comes. I look for 3 similar properties that sold in the last 3-6 months within 1/2-1 mile radius for comps. 

Total gut and rehab takes time. Since I don't know the property it is tough to guess what you might run into and what the costs of rehab are. On a project that size I always assume I need to be onsite each day to be sure the contractors show up, to keep them moving forward, to answer questions about unforeseen surprises. 

Select finishes that are at the same level or slightly better than the houses that are selling around you. Don't over build. Check and see if the converted garage was permitted or do you need to get permits to convert and will they even allow that. 

There seems to be enough meat on the bone to cover for most mistakes you will run into. If the market for houses in the areas is going up some that helps too.

As for the numbers: I break everything down to the cost of the wire for the rewiring, the cost of the copper line for the replumbing, cost of the sheet rock and on and on. It's a good exercise because I catch some of the things I missed on the first walk through. If you are using a general contractor it's harder to figure your costs. They always come back in the middle of the job and say "we ran into a problem and it's only $7,000 more to fix". Lol It's best to be your own general if you can find the time.

But, with the info you have provided I'd probably seriously consider doing the flip if I believed the market would support the sales price of $370,000.

Thank you very much, Mike!  Great point about seeing if the garage is permitted!  I'm a details person, so would love to break down the rehab like you mentioned.  I'm also a good project manager for computer projects and would love to manage a project schedule on my own for this!  

You are in the ballpark for the rehab. It will depend on the structural repairs. The can be nothing, or they can be offensively expensive. How large is the lot/location? What about a new build.

You might just take it down and list it. You'll could make more without the headache. That's what I've moved on to. 

Make sure you have good plans and talk to Arvada first. Look at the MEP hard. MEP is Mechanical, Electrical and Plumbing. It will kill your profit if you don't get it right. Arvada is particular about electric. 

@Sheri Lowrance The numbers look promising. I can't believe I'm the first one to say this: do NOT use Zillow's zestimate for ARV. And don't mention that to any partners or investors. Figure out the comps or get a realtor to do it for you.