While I think this is a good deal, i'm a little hesitant to jump on it because i'm still new at this and I'd probably have to get a HM loan which is something I've never done.

Property is in Southern IN (in the louisville, KY Metro area)
It's a REO priced at $55,900
1485 Sq Ft. 3br 2ba 1 car attatched garage.

Repairs in the $10-15K range (assuming i'm doing most of the work with some day labor)

The only comps i have are from houses forsale in the neighborhood, with asking prices from $109,900 to $125,900

Lets assume worst case based on the numbers you provided.

You pay the asking price, you spend $15K on repairs and it sells for the $109K figure.

There is no room for normal closing costs, agent's fee when selling, holding costs for the loan payments during the hold period (even if added into the loan), points for loan origination and overruns when stuff goes wrong.

If the sale price is higher, you get the property for less than the asking price and you do the repairs for the $12K figure you are back in the money. Slightly, just.

The deal is a good start as it will teach you how to evaluate the numbers. If you can sharpen the deal and make it really work all the better.

I am concerned that the repairs assume you can do the work. If you are hurt or something can you afford to hire it out? You need to budget for that just in case.

John Corey

Thanks for the feedback!

Here's my numbers:

purchase $56,000
Closing $4,000
Holding fees for a 50k loan, i have the money for repairs, closing and the 6K (3 points, 4 months of int, plus utilities, and home owners ins.)
$5,000

I'm fairly confident I can get the repairs done easily. I have 1 full time guy at $10 and can hire 1 or 2 other individuals for $8-12/hr. I've worked through being hurt before broken hand, cracked rib, concussion(i'm still young). I think the repairs will be in the 10-12 range but just threw the $15 in there for just in case.

Selling and closing costs should be right around $10K

So
56,000
4,000
5,000
15,000
10,000

So right at $90K.
Repair time should only take a month, most of it is just cosmetic.

I think an asking price of around $110,000 would be fair considering this home is a few hundred square feet more than similar homes in this price range.

Thanks
Joey

Before you decide to go ahead, you should do more research into what the property will sell for once repaired. Active listings are not the best indicators of market value. SOLD comparables are what you want. Call an appraisal company near you. Ask to speak to an appraiser. Tell him what you are doing and ask him to run some sold comps for you. He has access to the multiple listing service which is the best info available in your area. Ask him what he would charge and take him the money. Probaby charge you around $30.

I couldn't agree more. RUN THOSE NUMBERS! then run them again. and always budget for more time and money in repairs. That is the number one reason why I have seen people get over their heads and lose money on the deal. Also, make sure this is a good deal. Where I am in Austin is one of the hottest markets now, however, there are places here in town where there are so many REO's that values have held steady and gone down. Just because it is an REO doesn't mean it's a good deal. This is a common misconception. Try to find neighborhoods where there aren't too many of them, this will give you a better chance of being in a pocket area where the prices will stay stronger. I know in Austin if you had the time to post this and wait for answers it's already gone if it's a good deal so do the numbers for the whole area, find out what you want, watch the MLS daily and then pounce on it before anyone else and figure it out in the option period. That's what you have to do here to get a good deal but don't get discouraged, it might take a couple of trys but I think that's the safest play.