REO and Foundation Issue Rehabs - Easy Selling?

Question

Hey BP, although I can basically generalize that I could flip any property within 2-4 weeks, I am crippled by the unknown of selling. I have no experience in selling estates and the selling part prevents me from pulling the long awaited trigger.

A good friend of mine has had some rentals in AZ, but he wants to partner up the cash part with fixed return assuming 6 month transaction and a monthly fee every month.

Being an all in-house contractor, I think I could bring value add and create sweat equity in a major rehab, at least 10% of the ARV, the uglier the property, the better I can create. The rehab is without fear because I will simply assume worst case scenarios, something that every average rehabber is scared of, "what is behind the walls" or "the unknown". I would like to do at least a gut out rehab, or something that will cost 100-150k in construction cost to create enough sweat equity and bring down ARV and bring up profit.

My question is, how easy can you sell a property when it came from REO or have foundation issues? Let us just assume that it looks good, not average, and the wow factor is the living room that has a tile/stone fireplace on it. Sells for say 700k max. Permits and guarantee certifications are present. I might have acquired it for 450k or even 500k. If I leave out some details, just make some assumptions and help me out ;)

Brent Coombs · Answer

@Manolo D., well if it's "just like any other lender", then you owe him no loyalty, being "just another customer", right? Get other quotes.

Brent Coombs · Answer

@Manolo D., your "good friend" wants a "fixed return" AND "monthly fee"? Did I understand you correctly that you are thinking of using him as your funding source? If so, I would recommend you get alternative quotes also. Cheers...

Kyle B. · Answer

@Manolo D. talk to real estate agents in the area you want to flip and get their opinions. If you are going to list the property with them, then they of course will offer up all the knowledge they have of the market. If you find a good one, then they will know if there is any stigma from purchasing a previously foreclosed house or one that needed foundation repairs. In my area, I haven't really noticed any type of stigma about this. Of course it could be different in your market, so verify that with a realtor. My guess is that as long as you make all the correct repairs and pull the proper permits, it won't be an issue. However, since you're not an expert in selling, hire an expert for this area (aka real estate agent)!

Andrew Syrios · Answer

It's not easy to sell a property with foundation issues generally speaking. Very few other than investors will be interested in it, which is why they can be great purchases if you know what you are doing. If it's just a house you bought as an REO and fixed up (I may be misunderstanding you here), and you're flipping it, assuming the rehab was done well, that shouldn't be a problem.