should i still consider a house that needs foundation repair?

15 Replies

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.

Offer $40K and see what they come back with. I wouldn't go more than $50K. You need to make some money somehow. Is this a buy and hold or flip?

@Brock Siebert This would be for a flip. We are just getting started and our strategy is develop a cash pad in our LLC

I don't see how you make any money unless you get it in the low $30Ks.

Originally posted by @J Scott:
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?

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

@cal c My guess is around 5 in foundation work

@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.

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.

@Scott Lunn ,

To make the @ work, do the following:

Hold down the shift key and type @?

Look below this Window, and you will see a list of names of people that have posted in this thread.

Click on the name of the person that you want notified via an email, that you responded to them.

If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.

Then look below this Window and click on that person's name.

Raymond

@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?

Originally posted by @Scott Lunn :
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.

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.

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

Originally posted by @Scott Lunn :
Question really is what to bid and if I even should bid?

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.

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.

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.