So I have found a foreclosure that had an offer during the first look period, I am assuming the offer fell through and now the bank has lowered the asking price by 20K to $39,900. The house needs lots of work such as new kitchen, bath, and replacing subfloor that has had water damage. The bank (Wells Fargo) has placed a sump pump under the house and has done some foundation work. It was built in 1976 has single pane windows, no heating/air, need some exterior siding replaced(water damage) etc. I have the money to buy it, but not to do all the repairs. I can do some of the basic repairs myself such as flooring, fixtures, etc. My short term goal is to make it livable and move into it and eventually turn it into a rental or sell it. I think the house would need at least 40K of repairs. The tax value is 87k, 44k for structure and 43K for land. Rental rates in this area for this size house would be 800-1000/mo so it may not fit the 1% rule if repairs were more. I think one could sell it for at least 120K with basic repairs/upgrades. Any advice would be great!
Well if you pay cash and borrow hard money to renovate it you can Refinance it @70% of the appraised value. It it appraises for the $120,000 you will get back $84,000 which should pay for The renovation and the costs. Then you can either sell it or Rent it out or continue to live in it.
I would flip it as well. Since you dont have the cash for the renovations, I would reach out to some contractors and see if any are interested in partnering with you.
You bring the house, they bring the rehab money and expertise, you both split the profits.
Have you considered an FHA 3.5 mortgage plus money to rehab. If you are planning to live in the house you can get this kind of mortgage and that might work well for you?
Thanks for all the info. some great options here. I will need some financing and was thinking about paying the rest with a loan from my retirement. I do not have all cash to purchase the home which I should have clarified in my post. The realtor said the first offer did not go through b/c the bank would not lend due to the condition of the home, so I guess the bank decided to drop the price by 20K. I'm going to run some more numbers and maybe have a contractor give me an estimate on repair cost, I feel this is what I need help with, getting a realistic repair cost to make the home livable.
Yes Barbara I have considered an FHA loan with rehab cost, but the bank would not give that loan since I have one on my current mortgage.
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