I went to a property that's up for sale, it's been on the market for 55 days thus far, was recently reduced. It needs quite a bit of work, I'd say 30K to 45K in renovations, the price is $299, the Realtor that was showing the property said seller is motivated. I have researched the comps the price doesn't warrant $299K, I'd say $279K maybe. Would it be fetch to have Realtor make an offer of $200K or $225K or should I take a contractor to the house and see what he'd estimate repairs and then deduct repairs and come up with a price?
The answer depends on your level of comfort in construction estimating, but from the question, I'd suggest you bring a contractor along. Make sure it is a decent one with references and relevant experience. Also, is this a buy and hold or flip or other? The purchase price depends somewhat on your strategy, but I like the 70% rule or less for almost everything I do with properties. Pay no more than 70% of after repair value (ARV) for a property including rehab and holding costs. So, if the property is worth $300K ARV and needs $45K of rehab and holding, pay no more than $165K. Apologies if this was too elementary, but I wanted to cover all the bases.
@Nanette Miller your question tells me you do not know how to evaluate deals. Check out the free beginners guide under the learn tab above and search for 70% rule here on the site.
Do not base you offer on what you think they will accept. Base it on what works for you. You don't know what a seller will accept until you make your offer. I once purchased a property for $2000 that was listed for $68K. This was an exceptional deal but exceptional deals do happen.
Thanks Ned, you're right, it had entered my mine to offer 70 cents on the dollar but I figured there's no way the seller would accept; I must remember I can't think for someone else. Thanks.
Sounds like it doesn't matter if it's listed or not, goal is always 70% rule. I was just thinking differently because it's on MLS (which obviously has nothing to do with anything), right. Got it Thanks.
Right On, @ Marshall Downs.that margin of safety protects you from error.
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