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Updated over 11 years ago on . Most recent reply

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Brandon Sturgill
  • Real Estate Broker
  • Columbus, OH
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Estimating Value on a Complete Rehab

Brandon Sturgill
  • Real Estate Broker
  • Columbus, OH
Posted

I currently have interest in a SFH that is a complete rehab. The individual that purchased the house completed the initial steps, but apparently ran out of cash...Anyway, the house is basically gutted. I have good comps, but question the list price.

In effect, the ARV should be $160k after $25k in repairs, etc. The list price is $89k...any thoughts on this scenario?

  • Brandon Sturgill
  • 614-379-2017
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Realize Property Management Group
3.6 stars
20 Reviews

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Darrell Shepherd
  • Rehabber
  • Smyrna, GA
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Darrell Shepherd
  • Rehabber
  • Smyrna, GA
Replied

Make the offer and see. No real rules on this stuff. I'd do it at those numbers if it were close to home. Doesn't really make any difference what's in there if you're gonna replace it anyway, them taking things out just saved you some time and expense.

You need to have someone look over the work that's already been done before you buy, going behind someone can be a pain in the *** if they did a bunch of stuff wrong. You're not exactly dealing with a pro if he's selling halfway through.

Do have to say I disagree with your $18k profit approach. To each their own, and that works fine if you're only working low end deals, but your holding and selling costs are based on money in, so if things take longer than expected, market dips, etc. that $18k can disappear pretty fast on higher dollar stuff. I've run $20k over on a rehab before, that would have sucked if my margin was $18k instead of $60k. Ill cheat on 70% on lighter rehabs or high dollar ones in super hot areas, but still use that as my guideline. A 30% spread is only a 15% or so profit the way I do my business (6% RE commission and 2pts and 12% for private money). I like having that as a minimum, I usually don't mess with them unless I'm netting at least $25k, but like to have good spreads because these things never go exactly as planned.

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