Please evaluate this DFW possibility

8 Replies

Hello,

Asking: $135K

ARV: $185K

EDIT: Reviewing comps, might be closer to $200K.

DOM: 30

Seller has several active offers he/she is considering. At least one contract has been canceled because of the inspection, which I have reviewed. I am looking at the house today and might make an offer (if we got it, we would flip it).

Needs: New roof; possible foundation work (needs engineers report); possible plumbing work (old copper pipes); possible HVAC (has gas central heat and window ACs, would need central air, but seller may be in the process of updating) complete indoor rehab including floors; counters; light fixtures, refinishing cabinets; painting or otherwise fixing wood paneling.

I am estimating the rehab at $25,000 at the low end and $55,000 at the high end (if it needs a full set of foundation piers, etc.)

DFW is a very tight market these days. 70% might not be realistic.

What would you offer?

It seems a bit tight, if you can't get it lower than 130K (depending how motivated the seller is).

Have you done any deals in that subdivision before?

Also as far as foundation why the $30k jump? How big is the house?

If you shop around you can get foundation for $175 a pier (exterior) or $200 (interior). Also there is a pier every 6 feet, so try to figure that in with the square footage and go from there.

Just based on the numbers, I would say to offer $110k to be on the safe side.

Good luck!

This house doesn't happen to be in Garland does it? $25k for rehab seems very very low, and if rehab is $55k I wouldn't buy it at $135k. DFW is a very competitive market, especially if you are trying to buy off MLS.

@Jessica G. At first glance this deal looks extremely thin.

Even using 77.5% AND staying on the very bottom of your rehab budget (25k), which I don't love the idea of doing anyhow, since budgets have a way of creeping up. The MAO is 130k.

@77.5% and say $42,500 budget, which is certainly more realistic, you are left with a MAO of $112,500.

NOT to mention these numbers are assuming an ARV of 200k not 185k...

In conclusion the only way i would personally go after this deal is if it were structured as follows...

200k ARV @75% is $150k

-$42,500 Rehab (Split the difference)

=MAO of $107,500.

And even then I would be cautious

Be Careful not to force the numbers.

If you are planning on making a low-ball offer get a license GC to give you an estimate on the repairs not guess work because the seller might have already had a GC to give an estimate, and it would look bad if you lie about the repairs it could cost you the deal.

Joe Gore

@Joe Gore Um, thanks, Joe. I will try not to lie.

@Kevin Brown Nope, not Garland.

The house is 1,700 sf. The ARV is definitely over $200K after looking more closely at recent sales in that subdivision. Houses with carpet/formica are selling at $199K.

Worst-case scenario:

New roof: $7,000

Foundation work: $25,000

Plumbing work: $5,000

HVAC: $7,000

Floors: $3,000

Counters: $3,000

Fixtures: $1,000

Refinishing cabinets: $2,000

Painting: $4,000

Worst-case total: $57,000

Best-case scenario:

New roof: $6,000

Foundation work: $5,000 (drainage or other fix besides piers)

Plumbing: $1,000

HVAC: $0 (seller may be fixing this himself)

Floors: $2,000 (there may be wood that can be refinished under carpet)

Counters: $3,000

Fixtures: $1,000

Refinishing cabinets: $0 (this may not be needed)

Painting: $3,000

Best-case total: $21,000

EDIT: Of course, we would take holding costs, etc. into account as well.

Honestly, there's no way that you can make accurate assessments of deals if your budget could potentially sway by over $35k. I understand there are variables, but if you are going to make an offer, you need to get a GC out there.

UPDATE: We looked at the property, and it would have been a fun flip, but we ended up not being able to make an offer. They wanted way too much money for a property that was at extreme risk of big problems because of chronically deferred maintenance. For example -- the sellers' roof was ruined in a hailstorm a couple of years ago. They took the payout and kept it instead of fixing the roof. There were lots of obvious problems like that, which makes you worry what you'll find when you start opening up walls.

Also, the listing agent was ...um... not an affable guy. He refused to present an offer with an option period longer than seven days, even though a previous inspection flagged the foundation, plumbing, gas lines, electric, and more as needing to be checked. Plus, he kept asking us if the amount we wanted to offer was our "highest and best." YES!

So -- no problem -- we'll find something else!