Upside down properties

Rehabbing & House Flipping
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Upside down properties

Kendall Mitchell
Member since 2017 · 2 posts · 0 votes

Hello everybody I'm a investor currently living in the Chicagoland area. I was looking at properties in the Milwaukee area and they have many foreclosure selling for under 20k and the scope of work range from 50k-100k easily. The ARV for many of these properties wouldn't break even with the purchase price and rehab cost, thus selling the property would be losing money. I was thinking that a buy and hold approach would be best. What is the best strategy for properties with lower ARV then the purchase price and rehab cost?

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Brandon Roof
Rental Property Investor · Member since 2019 · 187 posts · 230 votes
7y

Unfortunately, I think the best strategy would be to move on from it.  Whether that be refining your search criteria or looking in different areas, you certainly don't want to try and rationalize something that doesn't work financially.  In the scenario you provided, buy and hold is no better in my mind.  I would be patient and simply look elsewhere.

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  • Brandon Roof
    Rental Property Investor · Member since 2019 · 187 posts · 230 votes
    7y

    Unfortunately, I think the best strategy would be to move on from it.  Whether that be refining your search criteria or looking in different areas, you certainly don't want to try and rationalize something that doesn't work financially.  In the scenario you provided, buy and hold is no better in my mind.  I would be patient and simply look elsewhere.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    Simply move on....you never want to spend more on a property than it is worth and could buy a comparable property...find s better deal or just buy the rehabbed comp.  

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  • Sam Renaud
    Investor · Omaha, NE · Member since 2019 · 5 posts · 0 votes
    7y

    Move on. Don't get held up on a property if it doesn't make sense financially.

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  • Kendall Mitchell
    OP
    Member since 2017 · 2 posts · 0 votes
    7y

    Thanks for all the input. It’s sad to see I thought there was a way to profit but guess not thanks again!

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  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    7y

    @Kendall Mitchell you have correctly recognized the scope of work amounts to a substantial number - you would not believe how many "deals" I get emailed that are 25k purchase price, rent ready, "needs only 5k/10k/15k in rehab" ..... and the ARV is just not there.

    Also, prices like this are only found in a small part of Milwaukee: if you want to know where, look at a Trulia crime map. Just for reference, median sales price for a single family in Milwaukee County is about 175k and up about 6% from last year. Better school districts command significantly higher prices and along the northern lake shore 7 figures are normal.

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  • Rebecca KnoxBusiness Member
    Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    The best strategy for properties with lower ARV than purchase price & rehab is to not buy it and find a different deal.

    Captain Save-A-Home LLC
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