I viewed a vacant distressed property going to auction, situated in a nice desirable neighborhood going to auction 3 days. It is a 3/2, 1400 sq ft.
I went to assess the repair cost estimates to get an idea of the improvements and work needed to wholesale to a Rehabber, or if it makes sense enough to hold and rehab then retail in 90 days.
The supporting comps show the ARV is $568,000; starting bid is $289,000
Rehab to investor costs:
- -NIP (net investor profit @ 20%) $113,753.80
- -RCE (repair cost estimate) $40,000.00
- -RE Agent @ 3% $34,126.14
- -Holding Costs @ 4% $22,750.76
- -Closing costs @ 1.5% $17,063.07
- -My Assignment fee $ 5k-10,000
Maximum Allowable offer = $351,669.84 - $356,669.84
Purchase and rehab myself
w/ 20% margin = $113,753.80 estimated profit
w/ 15% margin= $85,315.35 estimated profit
The property may be bid up beyond my Maximum Allowable Offer, but I'm getting out there to make it happen.
Part of me says wait for the next opportunity as this is not enough time.
What would you suggest?
I assume that when you are talking about not enough time you are referring to the 3 days to auction. I, personally, like to have a full house inspection and a bid from my contractor before I close on a property. If not, I am going to estimate very high on the rehab budget.
If I am using my own money I budget profit at 20% of the money needed to complete the project, not the projected ARV.
That's good to know @Bill Jacobsen, thank you. 3 days is quick and I would feel better if I had a full house inspection prior to bidding on the deal too. Some may say, even if we found out about the property hours before the auction, if the numbers work and it's a deal - jump and an estimate high on the rehab budget.
I would not have my own money for the deal, the plan would be a hard money loan for the short term to close, then refinance with a conventional lender if I rehab myself.
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Thanks @Raymond B.
Got it now!
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