Rehab or Wholesale?

[Robert Verdi]

I have found a foreclosed property for sale that has alot of foundation problems. I mean the foundation has fallen in areas and is leaning in other areas. The bank is asking 195k for this property that they took back at 83k. The seller's agent indicated that he turned down more than 83k at the auction. Not sure why.

I feel that the house needs to be torn down. How do I determine an offer price for this property?

My thought was to offer the 83k minus the cost to tear house down. The land is valued at 122k at the assessor's. Homes in the area are selling for around 300k. Any advice would be greatly appreciated.

If I could get this for what the land is valued at is this a deal that could be wholesaled?

[J Scott]

You need to figure out how much it would cost to:

1. Buy the property/land
2. Tear the property down and dispose of it
3. Build a new, conforming property in the area
4. Purchase, hold and resell the property (i.e., All fixed costs)

Add all those up, and subtract from the resale price you expect (ARV) for the new house. That number is the potential profit on the deal.

If that number is high enough to justify the work, you potentially have a good rehab deal on your hands. If that number is high enough to justify the work plus extra, that extra is potentially your margin if you were to wholesale to someone else who had the same numbers you did.