So I came across a deal from a colleague in Marietta Georgia . He tells me he was able to get a property under contract for 32k. Repair costs are roughly 60-70k. The ARV is 160k. He feels as though this property shouldn't be for the average investor but more of a handyman or a contractor who could get supplies and labor much cheaper than your typical cash buyer. My question is how much more could a contractor/ handyman carve out of a deal like this? Could they possibly cut out 15-30k?
Depends. Contractors typically have PRO accounts at material supply stores that give them somewhat of a discount on material costs. But your colleague may be referring to their ability to do much of the work themselves, saving on labor costs. Also, when you use a GC you are paying a premium for their managerial duties, this is so they can oversee subs on your behalf to get the job done and something they can save on if they did it themselves. If you have a relationship with a contractor I would suggest coordinating with them to do a walkthrough of the property and give you a bid. If the numbers make sense then the ball is in your court.
@Brendon Seeley wow thanks for the insight. I’m going to check out the property with the contractor tomorrow morning. I’ll let you know if everything is accurate.
What is he asking? $32k plus $70k, plus holding and closing costs and selling for $160k still looks like a deal ($40k profit?). Why does he think someone needs to cut $15-30k off the deal to make it happen? $60-70k (at least up here) isn't a full gut rehab, but a good sized project.
I would say it would cut out a little bit of the price of rehab if you were to use a handyman, but not by much. If you were to do the rehab on your own though, you're pretty much trading your time for cost. For my first property I did all of the work myself and saved thousands. In addition to saving money, you know the work is done right. Good luck!
$15-$30K carving is unrealistic. Good Luck Carl
A little late to the party here, but here's my two cents:
By the way you said he worded it, it sounds to me like the "60-70" would be the rehab number for an investor who is a contractor to do the rehab. So possibly add 10-20k to that for the newer/average investor to get the job done. That's just one thought, or it could just be like the others have mentioned previously before me^^^.
On another note, that sounds like a sweet deal and I would have jumped on it! Hit me up any time for help with any of these kinds of things.