Hi BP, Long time 'reader/follower/stalker' first time poster.
I've been a RE agent for four years, and have worked with investors in the past. The past 2 months my wife and I have decided to begin looking for a home to flip. Here is what I found...
Full brick Ranch 4 Bed, 2 Bath 1,900 sq built 1960 Asking is $129,900 -- DOM 2
AVM conservatively $225,000 up to $250,000 (recent foreclosure flip comp sold at $240,000) The area is HIGHLY desirable. I've driven by the home, and it looks like the ugly overgrown house on the block...aka perfect investment!
I will be viewing the property this afternoon with several other agents/investors. (elderly owners limited viewings) From speaking with the listing agent, the only 'known' issue is 'bow' in the living room where a grand piano has been sitting for many years and the home is dirty.
AC unit replaced 2000, unknown age of roof.
Finally to my question, I've read J Scotts book, but I'm not 100% comfortable with the estimating part. My contractor connections are unable to view home with me. The listing agent (and I) are confident the home will have several offers today.
I've ran the numbers and used $50,000 as reno costs (which I thought would be be high?) and the profit was acceptable to me ~$20,000.
Would you take this investment?
Thank you BP for the advice.
That's awesome that you and your wife decided to find a property to flip - super exciting! Just a quick analysis on the deal using the 70% rule... $225k x .7 = $157.5k - $50k (repairs) = $107.5k (max offer). I'd recommend getting an estimate from several contractors so you have a clear idea of what it will cost to rehab the property.
Keep us updated and good luck!
@Mike Hibbs let me try to help by sharing my personal experience regarding costs from up here in Massachusetts, which is not very significant to you but it might help anyways, here it goes:
Full bathroom: $5-12K (depending on size, fixtures, stone, ceramic, etc.)
Kitchen cabinets: $250 - 350 / linear foot (midrange cabinets)
Appliances: 2-3K (midrange)
Drywall and finish work: $50-75 / square feet.
Now, if you are gutting the entire place to replace the electrical and plumbing, costs will be definitely be much higher.
Plus you will need to check the HVAC, roof, lawn, driveway, garage, etc.
Keep us posted on your findings and results!
Mike, you really need to get an accurate handle on rehab. Not just for this property but for all. My suggestion would be to take your contractor out to lunch, buy it, location of his choice. Bring with you a list of potential rehab items that you would do if you kept any house. Get him to give you numbers on them based on sq ft, lin ft, number of, etc... Use this list on all future properties.
There's nothing like cost overruns on rehab to ruin a good day. Get control of it BEFORE you start making offers. You will regret it if you don't.
Congrats on finally making the move to invest. I would say if you've read J scott's book and are still uncomfortable, i would personally deduct an extra 5-10% to your best offer for wiggle room and make your offer, even though with his book and homework done on your area, you should be more than knowledgeable.
Always trust your numbers. If you don't get the property and your numbers worked for you, then consider it a good thing someone else over paid, less money they have moving forward for future deals... and there will always be future deals. Be confident and trust the fact that you will get a deal even if this one doesn't come through.
I think $20K is pretty thin for an investment (risk) that size. If you made a slight error, $20K could evaporate quickly.
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