Why Should I Not Run From This Deal?

4 Replies

I have a friend who is desperately trying to sell their house. The house is ok, about $7k for rehab costs. They owe $110k, but home comps for the area is running at $130k. I figure after closing cost I can pocket $10k. So why does my gut say leave it alone?

Seems awfully skinny. Not much room for "uh-oh" kinds of expenses one always seems to run across in rehabs. You also have to account for holding costs during the rehab (taxes, utilities, insurance, etc). Figure in for that and then if the house sells for even 10% lower than you expect and you're potentially looking at a net loss. That's probably why your instinct is to pass on it.

Thanks Jim, you just validated my gut instinct to pass. I think I can't get past my friend not wanting to go through a Realtor, to pocket the 10k for themselves. This is leading me to think possible larger issues with the home, like foundation.

How about the 6% you'll pay when you sell?  Or the taxes, utilities and insurance you'll pay during the rehab?  Or the concessions that the buyer's will ask for?  Will you be getting a loan -- if so, you'll have loan costs as well.

Based on your numbers, this dal is breakeven at best...

I took those into consideration, $7800 for the 6% about 7k in concessions or rehab. Taxes are due in two weeks, I don't think we would close before then, so seller pays. Ohhhhh....wow, my math was way off. It's more like a 2k deal at best. Not worth the time or headache at this point.

House was built in 2006, according to the seller, nothing major needs repairs. But according to the tenant agreement they have in place they have to give 48 hour notice to show.

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