should i still consider a house that needs foundation repair?

Question

House listed at 64k needs foundation repair and estimated additional 10- 15 k in rehab. Others in area going around 70k. Should I bid and if so what? My first investment home. Willing to sweat.

Account Closed · Answer

@Scott Lunn Ikes... Guess?  Foundation work requires many eyes if you are not familiar with this type of re-hab(I am a mason by trade "in my younger years") Get at least 3 estimates if you are not familiar with this type of repair.

J Scott · Answer

It's impossible to answer the question without knowing how much the foundation repair will cost?  Is it a $2000 repair?  Or a $20K repair?

Scott Lunn · Answer

@Cal C. Great advice thank you. I think what my strategy will be is to offer around 29 to 31k and figure on a consultation with an engineer and inspector before the final deal. My wife will be doing the cosmetics and other small work (she's pretty handy) and I am estimating a 20k rehab. I wonder if there is such a creature as a structural engineer that also does home inspection?

Cal C. · Answer

Basic rule of thumb is 70% of ARV should be spent on purchase and rehab.  Staying conservative.  $70k * 70% gives you 49K, less 15K for other rehab and $5k for foundation repairs (make sure these numbers are correct before buying) puts the number to $29K.  I realize that seems a crazy low number, but $20K in total rehab costs have a much greater percentage wise affect on a $70K house than say a $140k house.

BTW the seller is being ridiculous even they are trying to sell a house $6K below market when it needs $20K in repairs.  Even for a rental I don't see this being a good deal until at least the low $40Ks.

Cal C. · Answer

Good point.  I misread it  thinking the 10-15k included the foundation repair.

Brock Siebert · Answer

Sorry @Scott Lunn I thought the 15K included the masonry work...

I would offer what the other suggested above and include contingencies so you can back out if the numbers don't work.

Ed L. · Answer

As usual there are plenty of variables.  You will be required to disclose the foundation problem which based on my experience has a negative impact on future sales price after the repairs are complete.

If comparable move in ready homes in the neighborhood are going for $70,000.

You feel the home can be remodeled for $10,000-$15,000.  I'd say budge no less than $20,000 if this is your first flip.

Foundation repairs can be as simple as $500 to add support to a raised foundation home- to over $20,000 to add concrete pilings and lift a sunken slab.

Based on what You know I'd figure $20,000 on the rehab + $5,000 for foundation repair and add a 7 day inspection contingence to your offer so that you can have time to have it fully evaluated.

Based on that I'd be offering $25,000 for this property contingent upon inspection approval.

Brian Mathews · Answer

I think a lot will depend on what the foundation repair will cost.  Is it on a slab?  How bad is it?  You will find that when you move the foundation, you will quite possibly break some windows, flooring and plumbing if it's severe.   It will be an insanely low bid I would think, which will likely turn of the seller.   But you never know if you don't bid,  all they can do is say no.

Scott Lunn · Answer

Question really is what to bid and if I even should bid?

Brian Mathews · Answer

I'm missing something here or you had a typo.  So houses are selling for $70K needing rehab or as a finished product?  If rehab state, then what are they selling for ready to move in?  It seems to me that a house selling for $64K needing $10K in repair conservatively, before foundation repairs puts your cost at $74K before foundation.   And you can re-sell for $70K-ish.   It sounds like a loser for a flip, losing $4K+ doesn't make sense.

should i still consider a house that needs foundation repair?

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