To renovate or not to renovate?

10 Replies

I am about to have a house transferred to my name in Maryland. It's a total disaster and although I haven't had it appraised yet, I'm assuming I will not get much when I try to sell it. It was built in 1993, the driveway needs to be replaced, there's a sink hole in the back yard, the landscaping is horrendous and the interior has leaks, visable mold and nothing is salvageable. What I really want to do is gut it, remodel and sell it for the highest profit available. The houses in this area are selling in the 270,000 to 310,000 range. I really don't know where to start since I am a stay at home mother with no monthly income so I'm assuming I couldn't get a loan. I've heard of home equity loans and construction loans but I'm not sure which one would be best for my situation if any or if I should look for a private investor.Do you think it's best to sell it as is and use those profits for future investments or try to somehow make the most of this opportunity? Any advice would be greatly appreciated.

Originally posted by @Natasha M. :

@Holly S. Are you planning on doing the renovation from out of state? Or are you moving to Maryland?

 I would be be doing it out of state. I have family there that can help with the process and I travel there quite frequently.

I would first get more information from a good realtor to help value the property as-is and after repaired + a good contractor for a rough estimate of rehab.

Most cash buyers only pay 70% of after repaired value - repair costs.   Will you be receiving it free and clear or with debt/liens @Holly S. ?

To come out of your situation with most money in your pocket you first have to educate yourself.

First I would put a lock box on the property so that you or your relatives do not have be letting people in for inspections/estimating.

Second, I would establish as-is value and "After Repair Value" (ARV) by asking 4 or 5 real estate agents to give you both numbers.

Third, I would use “THEBLUEBOOK.COM” and get 4 to 5 suitable contractors to give you complete renovation bids.

Fourth, I would go to local Real Estate Investment Clubs (You can find them on internet) and talk to flippers. Many of them would be more than happy to provide repair funds and then split the profit with you. Again you would have to talk to 4 or 5 flippers and they would do their own estimate and tell you what they are willing to do and how the profit would be split.

Fifth, after you get all the proposals from the flippers than you call back all the contractors that gave a bid and ask them if they would be open to doing renovation with their funds and getting a portion of the profit on top of their bid. When the house is sold, first all the sale costs are deducted, then agreed repair cost is deducted and what is left is the profit.

Finally, how the profit is split depend on negotiation and on how extensive renovation was. It has to be win-win situation and the hardest thing will be to know when the people are trying to take advantage of you. That is why I suggested educating yourself and hopefully you come out with enough money to do this again and start having an income. You have an unbelievable opportunity make best out of it.

Also I would immediately start going to local investment clubs and really get to know investors and flippers. Remember you have valuable property! Almost anything that was built in nineties and has ARV of $270K is worth fixing.

Good Luck,

George Krajacic

p.s. When you narrow down to one or two potential partners I would check all their references and I would also check their credit(for credit check you have to have permission).

To come out of your situation with most money in your pocket you first have to educate yourself.

First I would put a lock box on the property so that you or your relatives do not have be letting people in for inspections and doing estimates.

Second, I would establish as-is value and "After Repair Value" (ARV) by asking 4 or 5 real estate agents to give you both numbers.

Third, I would use “THEBLUEBOOK.COM” and get 4 to 5 suitable contractors to give you complete renovation bids.

Fourth, I would go to local Real Estate Investment Clubs (You can find them on internet) and talk to flippers. Many of them would be more than happy to provide repair funds and then split the profit with you. Again you would have to talk to 4 or 5 flippers and they would do their own estimate and tell you what they are willing to do and how the profit would be split.

Fifth, after you get all the proposals from the flippers than you call back all the contractors that gave a bid and ask them if they would be open to doing renovation with their funds and getting a portion of the profit on top of their bid. When the house is sold, first all the sale costs are deducted, then agreed repair cost is deducted and what is left is the profit.

Finally, how the profit is split depend on negotiation and on how extensive renovation was. It has to be win-win situation and the hardest thing will be to know when the people are trying to take advantage of you. That is why I suggested educating yourself and hopefully you come out with enough money to do this again and start having an income. You have an unbelievable opportunity make best out of it.

Also I would immediately start going to local investment clubs and really get to know investors and flippers. Remember you have valuable property! Almost anything that was built in nineties and has ARV of $270K is worth fixing.

Good Luck,

George Krajacic

p.s. When you narrow down to one or two potential partners I would check all their references and I would also check their credit(for credit check you have to have permission).  

Originally posted by @George Krajacic:

To come out of your situation with most money in your pocket you first have to educate yourself.

First I would put a lock box on the property so that you or your relatives do not have be letting people in for inspections/estimating.

Second, I would establish as-is value and "After Repair Value" (ARV) by asking 4 or 5 real estate agents to give you both numbers.

Third, I would use “THEBLUEBOOK.COM” and get 4 to 5 suitable contractors to give you complete renovation bids.

Fourth, I would go to local Real Estate Investment Clubs (You can find them on internet) and talk to flippers. Many of them would be more than happy to provide repair funds and then split the profit with you. Again you would have to talk to 4 or 5 flippers and they would do their own estimate and tell you what they are willing to do and how the profit would be split.

Fifth, after you get all the proposals from the flippers than you call back all the contractors that gave a bid and ask them if they would be open to doing renovation with their funds and getting a portion of the profit on top of their bid. When the house is sold, first all the sale costs are deducted, then agreed repair cost is deducted and what is left is the profit.

Finally, how the profit is split depend on negotiation and on how extensive renovation was. It has to be win-win situation and the hardest thing will be to know when the people are trying to take advantage of you. That is why I suggested educating yourself and hopefully you come out with enough money to do this again and start having an income. You have an unbelievable opportunity make best out of it.

Also I would immediately start going to local investment clubs and really get to know investors and flippers. Remember you have valuable property! Almost anything that was built in nineties and has ARV of $270K is worth fixing.

Good Luck,

@George Krajacic

p.s. When you narrow down to one or two potential partners I would check all their references and I would also check their credit(for credit check you have to have permission).

@George Krajacic

Thank you very much for taking the time to write such a great response. I really appreciate it and I will take all of this into consideration! 

Sincerely,

Holly

@George Krajacic 

Thank you very much for taking the time to write such a great response. I really appreciate it and I will take all of this into consideration!

Sincerely, 

Holly Smoot

Hi Holly, One of my answer was not complete. I forgot to mention that one also has to deduct "as-is Value" from the sale price to get to the profit amount. I am sure you knew that but just in case.

Good luck,

George

@George Krajacic

Thanks George! I did know that "as is value" would be mine but I do appreciate you following up, just in case. You have a great day.

Sincerely 

Holly