First Potential Rehab Deal... what to offer???

Question

I just finished looking at a property listed with a realtor.  It's a bank owned property.  My question is how much would you estimate the repairs to be approximately?  Here is the following problems, repairs, or improvements need to be made:

1) foundation is cracked in multiple areas on one side of the house which is viewable inside the basement.  the basement is 300 sq ft.

2) main level flooring is uneven and/or warped (dry rot issue perhaps?)

3) full carpet replacement (home is 1,474 sq ft)

4) interior and exterior paint work needed (home built in 1940)

5) needs vinyl windows (there are 12-15 windows)

6) some wall areas need to be re-sheet rocked due to holes made from previous owner(s)

7) basement ceiling is low and should be lifted (room to be lifted another 6")

8.) need insulation and sheet rock in basement to cover foundation area to turn into a potential family room area

9) new kitchen cabinets

10) appliances (washer/dryer/stove/dishwasher/fridge)

11) new kitchen countertops

12) update bedroom closets

13) install regular sized door and doorways for 3 bedrooms

14) new front and back door

15) turn upstairs into a master suite... knock out a few walls and alter 2 bedrooms upstairs to a master bedroom with a walk-in closet and an attached master bathroom

16) landscape and curb appeal

17) stairs are kind of steep leading upstairs... don't know if could be changed?

18.) electricial wiring is wierd and to be re-routed... (light switch to bathroom is outside of the bathroom door entry

19) new backyard fencing

20) clean out storage

21) some parts of the roof does not have a gutter... needs additional gutters

22) pressure wash roof and patch up in a few areas

...a lot of work eh?  If you could give me any idea on a few things or a low and high cost in repair would be some what helpful.  I was pretty thorough, but I have no idea as to what the materials and labor is going to cost.  I am tempted on ordering a bid from contractors, but I don't want to waste their time in coming out and I never use them... or have them do numerous bids on homes and they are left wondering if they will ever have a rehab project to start on.

The property is worth approximately $230,000 ARV.  The bank is asking $144,000.  I was thinking of offering $120,000.  I was estimating about $40,000 to $50,000 in repairs.  Is that too high or low of an offer and repairs?

Thanks for any friendly advice you can provide.

Account Closed · Answer

James,

Being a contractor that is successful is definitely an advantage.

I like partnering with contractors who know their stuff. Many times they are not so good at finding the money. They are good at getting the projects done on time and on budget. More important can be screening out the dead ends or the money pits.

John Corey

Jon Holdman · Answer

That would be my guess.  If you think its 50K repairs, I'd use $75K unless you have firm estimates from actual contractors.  70% of ARV less $75K puts a reasonable price down like $75K or less.  With this much work, you're going to hold it a long time, so higher money costs.  I could see transaction and holding costs being 20% of the ARV.

If the floor is just wood floor that's warped from water, then you just have to find the leak, fix it, and fix the floor, like all cash says.  If you mean the joists are out of whack, you have a bigger problem.  Sounds like this might be the case, since you mention foundation cracks.  I would certainly have a foundation guy have a look as part of your due diligence.  Extensive dry rot could be about as big a problem.  One or two joists by a formerly leaky shower can be fixed.  Major damage to the sill plates would be much harder.  You want to get a good handle on what's going on during your inspections.

The steep stairs combined with the weird wiring make me wonder if the upper rooms were added with proper permits.  That's the sort of thing inspectors make you fix.

I don't think I would try to raise the house to gain 6" for 300 ft. of basement.  Unless you want a step somewhere in the main floor, you're going to have to raise the whole house.  I would certainly talk to the building department first and see if they will allow a basement finish with a slightly too low ceiling.  In my town, they would force any new addition to have the current code height, but old areas can be finished as-is.

I wonder about changing the windows.  New windows are nice, but if the current windows are working and are similar to others in the neighborhood, I'd put the money elsewhere.  New roof, perhaps.

Scrape and rebuild doesn't sound like a bad idea.

Jon

Minna Reid · Answer

That list is awfully long, and as a first timer, I dont think youd want to take this on, especially considering it doesnt sound like you have too much experience with home improvements. 
I didnt whip the calculator out, but to me it sounds like yes you are absolutely underestimating. 
Unless you are very experienced with repairs to that extent, I think you're better off to stay away from this.

Frank Adams · Answer

IMO, I think the price should be approximately that of a vacant lot-minus the cost of demolition!

I tend to do my own work (although jacking up and putting a foundation under, in order to raise the ceiling is beyond me) and I'm not sure I could bring this in for $50K

I'm guessing you have building codes so plan on re-wiring the whole house to bring to code.

Floor uneven and warped is MOISTURE, have to find it and stop it.

Don't know the size of the windows but a few hundred per is about right.

Carpet a few thousand.

Sheetrock repair a few hundred

Kitchen cabinets and appliances, minimum of about $5K for CUT RATE stuff.

Counter tops, $300-$3K

Insulate and sheetrock basement, a few thousand.

Knock out a few walls etc in the upstairs, about $5K+, moving walls is not as simple as "moving walls".

Bedroom doors, $100/each, minimum

Landscape and exterior paint, a few thousand.

"Clean and repair" roof! What kind of roof do you pressure wash and repair? Figure a few thousand.

Stairs above a certain "pitch" are considered "ladders" and "may" no longer be legal if leading to a regularly used sleeping area!

Unless you're really experienced at rehabbing, and know your market (it doesn't sound like either one applies-sorry) I'd run, not walk away from this.

BTW, if this house were in my area, no building codes or permits, and had that ARV, I probably would pass at any price above about $15K.

all cash