Gold Mine or Land Mine?

4 Replies

Hoping to consult the wisdom of the BP community - looking at the following deal as a first BRRRR property. Thoughts?

2-bedroom, 1-bath, 930 square foot single family home in a small tourist town in northern WI, listed for $48,000 and assessed at $32,000, estimated FMV of $34,000. On the market almost 3 months with a 13% list price reduction on 9/1/2020. It sounds like there was a potential buyer in late September who was unable to obtain traditional financing due to home condition. Targeting a $30,000 cash price and $30,000-40,000 in rehab costs to convert to a 3-bedroom, 2-bath. We can buy the house with cash, do the rehab with cash, with the BRRRR goal of getting 100% of our money out when we have the rehabbed property appraised for traditional financing. Local rents are $600-800/month for 2-bedroom, 1-bath homes and $800-1,000/month for 3-bedroom, 2-bath homes. Comparable 3-bedroom, 2-bath homes have recently sold for between $85,000-$112,000, so I feel good about the numbers and potential cash flow IF we can hit our rehab budget.

Here are the rehab projects we have identified:

*Update heating/cooling system so home qualifies for traditional financing (gas heater pictured below is only heat source in home)
*New siding
*Finish attic space into 3rd bedroom to increase square footage and rent potential
*Add small 3/4 bath upstairs (in the purple
*Finish the kitchen
*Finish installing matching LVP throughout house

Questions:  Why hasn't another cash buyer snapped this up yet?  Am I crazy to think we could complete the above projects for $30,000-40,000 in a small home if we do a good amount of the work ourselves?  We are handy and ready to tackle a big project!  Are there other rehab concerns I haven't considered that stick out to the seasoned pros out there?  Thanks in advance for your thoughts!

As a child, I lived in a 4b 1b 900 sf house in HI, so the square footage might not be a problem. I don't remember it being that small, but then I was only 7, so what did I know? 

Looking at pictures, you don't think the kitchen might be the problem? It looks like an afterthought. Storage? Appliances? etc. Do you have to upgrade the electric? (1950s houses here in CA only had 1 outlet in kitchen - fine for the toaster in the 1950s, not so fine for blender, food processor, can opener, toaster, microwave, breadmaker, coffee maker ad infinitum ... )

Is there a garage? It's snow country. 

Those are also talking points with sellers to bring price down. What are the comps? And what amenities do the comps have?

@Aaron K. Yes, agreed - luckily, the unfinished attic room is not currently counted in the square footage.  Finishing a 3rd bedroom in this space should be doable (and comfortable) without the need for an addition.

@Mary Cronin Great points!  No garage - potential for a one-car garage, but many homes in the neighborhood do not have one and we did not include a garage build in our rehab estimations.  Kitchen definitely needs additional outlets and cabinets (who am I kidding - the kitchen basically needs to be 'installed' from scratch!).  Good news is there's room in the electrical panel for new breakers.

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