Selling a rehab project...quickly

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@J Scott Thanks for the input. I meant to say 75-85% of assessed value but I mistyped. I’ve got a full breakdown of the last assessment which was done 2 years ago.

Also yeah, I did kind of jump in without a plan, but that’s because this property was marked for auction and I had to move quickly. But like I said, this one was a no brainer for the price I paid.

Also I’m fairly certain that the best use for this will be a fix and flip. What would be he best way to reach out to those types of investors. Can you recommend any specific forums/marketplaces? Or should I try cold calling builders in the area?

Chinmay J.

Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes

7y

Originally posted by @Teren Cooley:

Hi everyone,

So I’m a pretty new investor and I just closed on a property that needs major renovations. Floors, drywall, electric, roof, maybe plumbing, but I’m no expert and can not evaluate these things myself. I do know that there is already a well and septic system and the cinder block foundation still looks to be in great shape. Also, most of the studs along with the stairs still look good. That’s about the extent of my observations.

I bought it because it’s on a nice piece of land near some waterfront and I got it for a ridiculously low price and it just struck me as a no brainer. I’m concerned about cash flow right now and wanna sell this thing ASAP so I can move on to some other deals I’ve got.

How would you guys suggest moving forward? I don’t wanna invest any more at this point unless some inspections are completely necessary. I know the profit margin is there basically no matter what, but obviously I wanna get as much as I can for it. I’m thinking 75-85% I’d assessed. I’m already working on getting it up on the major channels (Zillow, fb, fl) but wanna be more proactive and line up a buyer soon. Thinking about calling builders and contractors but not really sure where to start there. Thanks in advance for your input!

Just flip it to someone at a smaller profit who has experience flipping properties, since you have no clue what you are doing, and get your money back. First telltale sign that you are clueless is that you can't even formulate the question correctly.

From next time might want to educate yourself a little better before taking the plunge.

God only knows what other deals you may have got..

Chinmay J.

Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes

7y

Originally posted by @Teren Cooley:

@J Scott Thanks for the input. I meant to say 75-85% of assessed value but I mistyped. I’ve got a full breakdown of the last assessment which was done 2 years ago.

Also yeah, I did kind of jump in without a plan, but that’s because this property was marked for auction and I had to move quickly. But like I said, this one was a no brainer for the price I paid.

Also I’m fairly certain that the best use for this will be a fix and flip. What would be he best way to reach out to those types of investors. Can you recommend any specific forums/marketplaces? Or should I try cold calling builders in the area?

Auctions are the last things a person w/o a plan or experience should buy..

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

7y

Originally posted by @Teren Cooley:

@J Scott Thanks for the input. I meant to say 75-85% of assessed value but I mistyped. I’ve got a full breakdown of the last assessment which was done 2 years ago.

Also yeah, I did kind of jump in without a plan, but that’s because this property was marked for auction and I had to move quickly. But like I said, this one was a no brainer for the price I paid.

Also I’m fairly certain that the best use for this will be a fix and flip. What would be he best way to reach out to those types of investors. Can you recommend any specific forums/marketplaces? Or should I try cold calling builders in the area?

Assessed value is meaningless. That's just a value assigned by the local jurisdiction to determine a tax amount -- it has little relationship to the market value of the property. You need to determine the *market value* of the property.

If it's a fix and flip, you need to determine the ARV (resale value after repairs) and the rehab costs, at a minimum. With those two numbers, you can get a basic idea of what an investor would pay for the property. But, the ARV isn't the assessed value -- it's the after-repair market value, which is best determined by a good real estate agent or appraiser who can determine this based on the renovation anticipated. And the rehab cost must be the cost associated with the renovation to achieve the specific ARV your determined. These numbers are highly interrelated.

Once you have those two numbers, you can get an idea of the value of the property as-is. Then you can market it through Craigslist, local REIAs, here on BP, etc. Though I always recommend putting it on the MLS as well, as many investors are looking at listed properties these days. You'll need to find a local real estate agent or flat fee listing service for that.

5 Reply

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@Chinmay J. That’s pretty rude. Why don’t you just refrain from commenting if you’re just gonna criticize me? I thought this forum was about sharing information and helping people out, not insulting.

4 Reply

Chinmay J.

Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes

7y

Originally posted by @Teren Cooley:

@Chinmay J. That’s pretty rude. Why don’t you just refrain from commenting if you’re just gonna criticize me? I thought this forum was about sharing information and helping people out, not insulting.

Yes it was a little rude, but it's truth though. If you have no clue what you are doing you should get out of that deal. Now tell me that's not helpful tip.. As far as the style, I think I was talking to a grown man, and I think you can handle it.. Find a way to get over it by end of the day and move on to something you do understand before spending your hard earned money...

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@J Scott Actually in this county the assessments are done by a third party appraiser. I do have an itemized list of exactly how the appraisal was done a couple years ago. I’ll try to contact another appraiser to maybe get a second opinion and call a few agents. Thanks for the help

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

7y

Originally posted by @Teren Cooley:

@J Scott Actually in this county the assessments are done by a third party appraiser. I do have an itemized list of exactly how the appraisal was done a couple years ago. I’ll try to contact another appraiser to maybe get a second opinion and call a few agents. Thanks for the help

First, there is zero chance an assessor/appraiser actually went *inside* the house to determine a tax assessment. So, even if it were an appraiser, it was just a drive-by assessment of the exterior of the property.

Second, the point of an assessment is to determine the tax value of the property in *as-is* condition. That number is meaningless to you. You need to know the ARV -- which is the value of the property *after* renovation. This will be determined by the extent of the renovation, the specific level of materials uses, any layout changes or functional obsolescence, etc.

It sounds like you're looking for a shortcut here to make some quick money. Real estate is a great way to make $$$, but there are no shortcuts...

2 Reply

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@Chinmay J. Listen to me, if the house burned down today and I had to sell just the land, it would still be a great deal. As a matter of fact, I was only looking for vacant lots in the area when this opportunity came across my table. It is 100% a profitable deal so don’t tell me to cut my losses and get out. This is a perfect opportunity for me to learn some new skills and figure some things out as I go, so that’s what I’m gonna do.

You’re not gonna hurt my feelings, but your advice is nonsense

2 Reply

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@J Scottb. I’m not looking for a shortcut. I just wasn’t necessarily looking to get involved in fixing up the property myself. I feel like I’ve done the hard work already by securing the property for what I paid for it. I’m really just looking for someone to take on the project. I’m sure my asking price will be a great deal for them as well.

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@J Scott you’re probably right about the drive by appraisal. It is pretty in-depth though. If you’re willing, I can send it to you to take a look at and give me your opinion. If anything maybe I can contract the guy to come out and do another more thorough appraisal

Victor S.

WorldWide · Member since 2016 · 1k+ posts · 1k+ votes

7y

research some local contractors and start having them come out and provide estimates. walk with them and note what they're paying attention to/telling you to fix. property sounds like a total gut, so you're definitely looking at tens of thousands in repairs. just like everyone else said, determine your arv and rehab. you can use redfin and easily see what nearby comps had gone for. discount that a bit to stay conservative and add a contingency to your reno budget. once you determine that, then you can see what the best course of action is - either jump in yourself or pass this on to another investor for a little premium.

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

7y

Originally posted by @Teren Cooley:

@J Scottb. I’m not looking for a shortcut. I just wasn’t necessarily looking to get involved in fixing up the property myself. I feel like I’ve done the hard work already by securing the property for what I paid for it. I’m really just looking for someone to take on the project. I’m sure my asking price will be a great deal for them as well.

Without knowing what it's worth to a rehabber, how are you sure that your asking price will be a great deal?

That said, if you're sure it will be a great deal, throw it on Craigslist and it should sell quickly. If it doesn't, it's likely not a great deal.

2 Reply

J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

7y

Originally posted by @Teren Cooley:

@J Scott you’re probably right about the drive by appraisal. It is pretty in-depth though. If you’re willing, I can send it to you to take a look at and give me your opinion. If anything maybe I can contract the guy to come out and do another more thorough appraisal

You don't need an appraisal (as if value)...you need an ARV (after repair value). A good, local real estate agent will be better for that than an appraiser.

And you won't be able to get a reliable ARV without having some idea of what level of renovation is anticipated.

Remember, the rehab costs and the ARV are interrelated -- more rehab costs will generally equate to higher ARV (though not always). Figure out the renovation plan and rehab costs first, and then use that to determine ARV.

Even if you're not planning to renovate the property yourself, this is necessary if you want to determine your maximum resale value.

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3 Reply

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@Victor S. Gotcha, so basically I’m torn between investing some more time and money to determine repair costs and sell for a larger profit, or try to find a buyer to try to find a buyer to take it “as is” for a decent discount. Thanks for the input!

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@J Scott I’m not sure my asking price will be a great deal. But the price I would need to sell it for to profit would be a phenomenal deal for the buyer. Obviously I want to sell it for the highest possible price, so I guess the best course is to find arv and repair costs, price it accordingly and be willing to negotiate to find a buyer quickly

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Teren Cooley I recommend you do a lot of research before buying anything else. You’re making this up as you go lol.

Who knows if you got a good deal. You haven’t posted any numbers. Tax appraisals are awful. Last deal I bought had a tax appraisal of 23k, I paid 38k and the appraisal was 55k. See the problem? Good luck

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@Caleb Heimsoth I’ve done plenty of research in the area. Like I said, I was only looking for vacant lots which I have experience with. I just happened to stumble upon this deal which has a house on it. That’s the part I don’t have much experience with. However, even if the land were vacant, it would have been a deal at the price I paid and I still would’ve bought it. That’s how I know it’s a profitable deal. The house being there is just gravy on top and seems to be a great opportunity to cut my teeth and grow as an investor. If I would’ve waited and done weeks of research, I would’ve lost this deal. Finally, the investment cost for me on this deal is negligible, so the risk is minimal. If you wanna privately message I’ll give you more specifics if you’re interested in taking a look and giving your opinion.

Tanner Marsey

Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes

7y

Mark it up, sell it, be done with it and enjoy your profits.

Ray Hill

Rental Property Investor · New Milford, NJ · Member since 2018 · 8 posts · 15 votes

7y

If you’re not knowledgeable in real estate, rehabbing and all of that but you’re sure you got a good deal and you are not under pressure to move quickly then so what? Nothing wrong with that. Finding a deal, finding something undervalued is pretty much the first step in any investment. It doesn’t sound like you went out on limb in danger of losing it all. You gotta learn somehow. People don’t just wake up one morning and become experts.

I say explore your options. Find out what other houses have sold for that are similar. Talk to local contractors and see what it would cost to bring the house into a condition in which it will sell at a price that makes sense. Or do something else.

You get some of these people that come here with analysis paralysis and people will say “just got for it”, “just do it”. Then you get people such as yourself that will put themselves out there without a clear view or understanding. People will get on your case either way.

For what it’s worth I think you’ve gotten some good advice so far. It doesn’t sound like you’ve done anything very risky. You’ll learn something here and when you find the next deal, it’s clear you’re not afraid to pull the trigger, I’m sure things will work out. I’m hoping you’ll keep us posted as to what happens. Good luck.

Joshua Bufford

Member since 2019 · 6 posts · 3 votes

7y

@Teren Cooley I just sent you a direct message. I don't know if I can help, but I am an investor in the Richmond VA area. I'd be willing to come have a look with you and see what you've got. Maybe I can learn something and maybe I could help. - Josh

Ashraf Spahi

Real Estate Agent · South Florida · Member since 2016 · 35 posts · 17 votes

7y

Originally posted by @Teren Cooley:

@Victor S. Gotcha, so basically I’m torn between investing some more time and money to determine repair costs and sell for a larger profit, or try to find a buyer to try to find a buyer to take it “as is” for a decent discount. Thanks for the input!

Congrats on the house, at least you took a step into investing instead of sitting on the sidelines, you'll only learn by doing.

This is what your game plan should be:
1. Talk to an agent and figure out the current value (help you determine how much of a deal you got) then talk to them about after renovation value.
2. Hire a property inspector to inspect the house and figure out what's wrong with it.
3. Take those issues to the right contractors and get estimates
4. Calculate all those totals for rehab estimates
5. Now knowing the ARV and the rehab estimates you can determine if the profit is large enough for you to want to learn how to rehab a house
6. If it's not worth your time or too much work, drive around and look for other homes under construction. There you'll find rehabbers who may be interested in buying your house.
7. Cash out $$

6 Reply

OP

Richmond, VA · Member since 2018 · 47 posts · 20 votes

7y

@Ashraf Spahi Perfect, thanks! This is exactly what I was looking for

Stephen Glover

Property Manager · Richmond, VA · Member since 2018 · 204 posts · 297 votes

7y

@Teren Cooley I’m in Richmond and would be happy to help if you want to send me the information. I’ll walk you through what I would do in your shoes. Good luck!