Property Value Post Renovations

4 Replies

Hello everyone!

I'm looking at getting into buying and holding and I have a question about a piece of property I'm looking at.  The property in question is a 3 unit that is currently listed for $50,000.  It's a total mess on the inside and I've gotten estimates from contractors stating that it would take about $100,000 to turn it into 3 nice units.  So my total investment would be around $150,000.  When looking at comparable properties in the neighborhood, not many have sold/are listed for above $140,000.  Should I care that I might be into this property for more than the average home in the area is selling for (granted none of them are nice, up to date 3 units) or should I only look at if my numbers work after getting renters into it?  Does that make sense?  Another (shorter) way of asking my question...If my goal is to buy and hold, does it matter what I am into a property as long as my numbers work when it's rented?  Thank you!

Why not just buy one done for $140,000 save the aggravation of an extensive rehab ?

Originally posted by @Chuck W. :

Why not just buy one done for $140,000 save the aggravation of an extensive rehab ?

 None of the ones at $140,000 are nice, up-to-date 3 units.  Lot of them are singly family homes or rough looking 2-3 units.

Jamie, what you described sounds like a whole bunch of heart ache. With a purchase price of $50K, you're buying just the land --- a "tear down". Add another $100K for rehab (maybe more if unforeseen issues arise) and you're already above the price of the best comparable in the area. Leaving little room for equity appreciation long term. How are you financing? If all cash, where's your ROI after ALL operating expenses, and free cash flow?

If demographics of the neighborhood will support a quality multi-unit rental property, I'd negotiate the price down from $50K. Then demo the building and replace it with a quality set of units. Hopefully keeping the total for new construction under $200k --- if those numbers can work long term.

Barring that, I'd walk past that building and find a better opportunity. This one probably won't even flip.

Well, life happens. What do you do if something happens in your life that forces you to sell?  Will you be able to recover your invested money, or will you have to take a loss?

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