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.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.