THROW ME YOUR BEST AND HIGHEST OPINION

[Sam Mathew]

Hello Bigger Pockets Members,

Here is the situation: 

I won an third-party auction bid for a bank foreclosed single family home.  My bid was the highestest $425k but did not meet the reserve and so the bank may still consider and approve it (or reject it).  

The house needs about $200k in work (assume it will take 4-6 months).  But then likely worth the similar market value of $850k.

The bank came back and said to send my HIGHEST and BEST offer now for their consideration.

If it were you, what would be your highest and best offer be?

note: fell free to use your own assumptions on economy, future markets projections, inflation and such that you would like.  For this example, this is only information available to make a decision....which could include 'walk away' from the deal.

Investment Facts:

Original Bid: $425k (but now asking for highest and best)
Rehab Costs: $200k
Original Total: $625k

After Market Value: $850k (Approx)

Shoot me a number....Let me know...!  :)

I'll keep you updated.

[Ray Hage]

Quote from @Sam Mathew:

Hello All, it’s been quite some time since my original post but I closed on this home a few months ago in Nov 2022, for $290k and the rehab work continues. I will show you the latest picture if I can post it. Again this is a 3,800 sf home on 5.2 acres, so pretty excited to get the work done and  see what I will do with it. Likely sell it unless some better idea to keep it and be profitable. I appreciate all the feedback received from you all

Hi there. How's the project going on the whole? Do you still have the expected costs and ARV? I am an investor myself but have never taken a project on of that size. I hope to get to a big fix and flip like this eventually

[Sam Mathew]

Quote from @Ray Hage:

Quote from @Sam Mathew:

Hello All, it’s been quite some time since my original post but I closed on this home a few months ago in Nov 2022, for $290k and the rehab work continues. I will show you the latest picture if I can post it. Again this is a 3,800 sf home on 5.2 acres, so pretty excited to get the work done and  see what I will do with it. Likely sell it unless some better idea to keep it and be profitable. I appreciate all the feedback received from you all

Hi there. How's the project going on the whole? Do you still have the expected costs and ARV? I am an investor myself but have never taken a project on of that size. I hope to get to a big fix and flip like this eventually

Hello Ray, thanks for the response. So the rehab project is going well overall, pretty happy with it so far, and the team. With any rehab, you tend to have surprises but for the most part if you're planning 20% for unexpected work (25% in this case), that's pretty good buffer, and even buffer if not needed. I have bought a dozen SFH rental homes (but far smaller) over the past few years needing some rehab. From thoses rehab experiences I tried my best to predict the project items and costs for this home, which now has about 30-40 line items of work and then their realistic exstimated costs. And then, of course, on top of that are all other unexpected, unknown work that will definitely come along. But again, so far, it's been good. One of my biggest items that I'm not sure about yet, is that this house will need much more luxurious furnishing/finishes than my typical small rental homes, so for that, I might need to seek professional decorator help to see what colors/materials I might use for those work items like flooring, paints and such.

As for you question about ARV, that is basically my own research conducted of neighboring homes, communities and rough estimations. It's a guess of course as risk involved with what the the future be in six months, interest rates, demand, and market conditions. But my best guess right now is that conservatively, ths house should go for at least $850k with basic rehab done. Or possibly over $1M if we can capture that amazing breathtaking feel when someone walks in. I am trying my best to make it nicer than just basic, adding a 7' water fountain in front, pergola, fire pit, maybe green house in back (all very affordable to add), plus plenty of land for horses or other animals that the new owners may wants to have.

[Ray Hage]

Quote from @Sam Mathew:

Hello Ray, thanks for the response. So the rehab project is going well overall, pretty happy with it so far, and the team. With any rehab, you tend to have surprises but for the most part if you're planning 20% for unexpected work (25% in this case), that's pretty good buffer, and even buffer if not needed. I have bought a dozen SFH rental homes (but far smaller) over the past few years needing some rehab. From thoses rehab experiences I tried my best to predict the project items and costs for this home, which now has about 30-40 line items of work and then their realistic exstimated costs. And then, of course, on top of that are all other unexpected, unknown work that will definitely come along. But again, so far, it's been good. One of my biggest items that I'm not sure about yet, is that this house will need much more luxurious furnishing/finishes than my typical small rental homes, so for that, I might need to seek professional decorator help to see what colors/materials I might use for those work items like flooring, paints and such.

As for you question about ARV, that is basically my own research conducted of neighboring homes, communities and rough estimations. It's a guess of course as risk involved with what the the future be in six months, interest rates, demand, and market conditions. But my best guess right now is that conservatively, ths house should go for at least $850k with basic rehab done. Or possibly over $1M if we can capture that amazing breathtaking feel when someone walks in. I am trying my best to make it nicer than just basic, adding a 7' water fountain in front, pergola, fire pit, maybe green house in back (all very affordable to add), plus plenty of land for horses or other animals that the new owners may wants to have.

 It sounds like you have great experience and decided to take a big step up into this house flip. I agree it's better not to go for basic when you're trying to get in a sale near or over the 7 figure mark. At that price, people are not trying to be basic so anything you add that create a ton of value is most likely going to be worth the investment. Right now, the market has slowed a bit but there is still not enough supply (and most of it not that great) so I am sure yours will stand out from a "feel" perspective when a potential buyer walks the property. 

About the risk, I agree, if it is going to take a lot longer to finish it up, it could be difficult. It appears rates are going up again (though we can never be sure) and that could hurt the market a bit more. Hopefully your project doesn't take that much more time as you never know what can happen between the Fed, inflation and a ton of other factors.