What's the best possible outcome?

Question

Hi everyone, I'm working a lead that's a 2 bed / 1 bath / 634 ft home on a 2000 ft lot, so not much room to work with however, she owns the adjacent lot which is also 2000 sq ft and vacant. She is asking 106k for the home and would want "a lot more" than 106k to include the second lot in a package deal.

Ms. Owner says it's a complete gut job. New roof, windows, siding, HVAC, insulation, etc. I see 3 options here:

1) Fix and flip the current home

2) Demo and rebuild a slightly bigger home (800-1000 ft)

3) Rehab and add-on to the current home

Here's my question - assuming a $275 per square foot ARV, whats the best course of action? And whichever choice you think is best, whats your buy price? (A vague estimate is much appreciated)

Thank you in advance,

Max

Andy Sabisch · Answer

I am familiar with Wilmington - worked in the area.  It is a dynamic market but remember you have to buy right to make the money . . . you don't make it selling if you paid too much.  Are you in the area so you can oversee what is going on or are you going to have to find someone to manage from afar?  The price to flip without demo'ing and rebuilding would have to be well south of $100K to make sure you walk away from closing with money in your pocket and not everyone else's.

Looked to see what the houses look like in the area - really gone up in 15 years!  The price / ft2 and the lot size of what you are looking for are on par with what you are shooting for.  Have you done a flip before?

One thing that stood out is that there seem to be a fair number of properties with sizable price drops yet are still on the market.  Remember that as interest rates go up, the buyer pool shrinks.  Are the properties selling rentals or vacation homes?  If so, the demand for these is dropping faster than primary homes.

I would walk through the property you are looking at and try to get a better reno cost so you can speak from facts rather than generalities to the owner and see if you can convince her to come down.

Feel free to message me if you want to talk specifics and do not want the details posted . . . .

Max Jiampetti · Answer

@Andy Sabisch Thank you for taking the time to reply, I appreciate your input, this property is in Wilmington. The $275/ft ARV comes from similar sold homes in the neighborhood, within the last 6 months, under 1000 sqft with no special features like garage, pool, large patio, etc. The reason for my post is because I’m curious what strategies other investors would consider in this situation, and why. Wilmington is both a great rental and flip market with new construction popping up everywhere.