I am looking to make a purchase and have been approached with a property from a whole seller. He gave is ARV and Rehab costs and a suggested price for his sale to me. The question I have is to what extent should a property be rehabbed to? Do you ignore minor repairs? Do you make your property in the top 1 or 2% in the neighborhood? Do you go cheap using vinyl and bland appliances even for a first time home buyer market or do go with tile and stainless steel to attract and be the out front property?
I am being told to ignore some of my scope list stated below. This far I have done 1 flip and hold many rentals.
Scope of work for a single family in PA
New tub and flooring and possibly drain and faucet replacement
New vanity and fixtures
Bedrooms and hall way
Windows? some were old
Patch and Paint
Some moldings were old style? may need to update
Front Door needs replacement
new Sink, cabinets etc
Update flooring, vanity, toilet
Fix ceiling in family room
Flooring in family room (engineered hardwood flooring)
New electrical panel (200A)
New back door to kitchen
Roof has shingles missing from the weater either replace or repair.
Lower roof on addition is old
Replace back down spout
Back patio is out of date and either needs replacement or recoating
Pressure wash siding and paint entire house
New cement walk way
Landscape front and side of house
Replace driveway with new black top
Remove old tree out back
Update old shed out back with new wood
Fix wire fense
Capping two outside windows.
Moisture issue and rot in crawl space
Termite or pest inspection in craw space
Flow from front door to family room is odd
I'm no pro, so take this as just knowledge from my recent reading here.
I'm not sure I would pay much attention to an ARV that a wholesaler is giving you. I'm sure there are reputable ones with track records and such in that area, but if this one is new to you I'd be careful taking ARV advice from them. Obviously it's in their interest to make you think the ARV is sky high.
I would look at similar listing in the area that are available to see what the 'norm' for the area is as far as finishes. I'd also look at as many SOLD comps as I could, paying particular attention to what was done in them VS the sales price.
Personal preference, but I wouldn't feel right selling the property with any sort of serious moisture/mold issue or rot that could be a fairly easy repair.
Since you certainly would know the area better than a lot of us, I'd recommend going through your SoW and rating the items. For example, on the left of each put the cost on a 1-5 scale, 1 is cheap, 5 is expensive. On the right put your approximate impact on resale price, 1-5 scale where 1 is no impact, and 5 is huge impact. Then put the right number over the left number in a fraction and you have an impact / cost factor. The higher the better! I thought this up when doing a few practice CMAs in my area.
I haven't purchased a rehab property yet, so take this for what it's worth. Just my 2 cents. Hope it helps in at least a small way!
I agree with @Micheal Waldrup ,
Do not pay attention to the ARV and rehab from the wholesaler unless you know and trust them. Do your own calculations.
It would be almost impossible for someone on here to tell you what should be included in the scope, unless they know your specific market like the back of their hand.
I think @Brian Burke said it best when he said something like:
Don't spend a single dollar on something that is not going to produce $1.XX in return. It doesn't matter if you like it, or what an ideal home could/should look like. It matters what the market and buyers in that area are willing and able to pay for what you've done.
Have you looked at a bunch of open houses at flips to see what they look like and they are selling for? Do you have an agent that does lots of open houses and knows what people love, and what people couldn't give 2 craps less about? Do you know what the must haves/deal breakers are? And what can be relegated to the bottom of a list?
Hopefully, those questions give you a start..
J Martin and M Waldrup thanks for your advice. I agree with knowing your own numbers. I guess experience and local market specifics is critical.
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