Hello I am new to investing and have been trying to learn as much as possible in the past year.My entire family knows of this and my in-laws came to me with an idea to "help" me and also would be helping them with a Real Estate deal.
Back Story- My wife's grandmother passed away last year and the estate, two properties, are to be sold and the profits spread out among the 6 children. One of my wife's uncles was in charge of one of the properties which is zoned for commercial/residential, it is a 1708 Sqf office space/small warehouse on .36 acre lot.Which with some research it can be split into 2 lots.He let the property go to the dump, needs a new metal roof, and gutted, replace plumbing/bathroom, replace electrical etc...
Now my wife’s Aunt is in charge of the estate and she was the one who approached me.She said they will "sell" me the property for $30K (estimates from Real estate agent say property is worth $43-$53K in current condition) Which then I could clean the property up and try to resell with the improvements.
Now if I did replace the roof make the inside look nice and clean the overgrown landscaping I was told (real estate agent) it could get about $60K, but there are back taxes and liens on the property as well.Plus closing cost for when I sell it, I have run the numbers and it seems that I would MAYBE make $3000-$9000 conservatively.
But I am real concerned over the fact that it is used as an office/commercial, and wouldn't this limit buyers?And even if an investor wanted to put small apartments/duplex etc.. wouldn't they not care about the structure and then the property is worth less to them (property value is $40K)
Is it even worth the time to attempt to Flip a property like this?
@Joe Hausen - Good question, but, it seems like you are not totally at ease with this undertaking and rightly so.
My take is that this property might not be worth your time and effort to acquire, pay the overdue taxes, refurbish and sell for a measly amount of profit if not a loss.
The residual amount that you project for cash collection is borderline, or just above the profit margin and might even be headed in a negative direction.
I sense that you are caught up with the family aspect of it and believe that you must satisfy their request.
No, you don't have to do it if the project is not a solid business decision to pursue.
How much is it worth as land?
Could it be rented out as a warehouse in its current condition?
If you do not have any experience in flipping, I would suggest selling it as-is. 3-9k profit margin is pretty narrow margins. It wouldn't take much for you to be in the hole pretty quickly.
Jesse- The land by itself is at most worth $40K, comps (lots) nearby on an off street sold for $36K and no it is not in any condition for any type of use. The last improvement or worthwhile repair was in 1997, The uncle really let it go…
Linval- Your right about the family part, I didn't want to type to much in the initial post, but I keep going back to the numbers because the money that the in-laws get from the sale will get the 3 brothers who are essentially squatting in the other property to move out. Which is a 3 bdrm 2 bath SFH by the beach in St. Augustine FL. It is also in bad shape but is worth $130K in current condition and the Comps for a recent sales are in the high $200K- 30 days ago- 2 houses down sold for $280K. With the brothers getting out of the SFH then I would be the first in line to purchase the property to flip. But with all of the family aspect and the amount of work needed for both and headache of in-laws being involved, I feel like Bird dogging for both might be the best thing maybe?
With that margin after the costs to sell, margin of error, concessions, holding costs, opportunity costs, and taxes it is going to be TIGHT. From what information you provided it sounds like your family knows you really want to find a deal and they brought you what MIGHT be a deal, but really they want you to deal with it.
I think it might be worth asking someone with extensive knowledge of flips like j. scott
@Joe Hausen You said "with the brothers getting out of the SFH then I would be the first in line to purchase the property to flip", but, would that only apply if YOU do the first flip? (ie. why wouldn't you still get that chance if your wife's aunt just sells the first property through an Agent)?
Too many if's and but's?...
Brent- Regardless if it is me or someone else who buys the first property, it has to be sold so the funds can get the 3 brothers out of the SFH. And I would still be up first for the SFH, my wife's Aunt just knows a lot about me wanting to break into REI. She also just wants these properties off of her hands, and thought it would be a win-win type of scenario...
Which is also why I was looking into Wholesale but I never intended on doing that as my focus so I am not sure of the logistics for that and Bird-dogging...
@Joe Hausen Thanks for sharing those extra details. One thought could be for her to let you market the property on her behalf, with you getting an pre-determined "cut" once the property is sold? (ie. why should you need to run the risk of being upside-down on a family deal)?
Regardless, have you worked out exactly where your interest in real estate is heading towards? Do you expect to be able to regularly wholesale properties in your State without a License? Or are you getting Licensed? All the best...
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