We had our offer accepted on a upper/lower duplex in a mostly single family area, so no real comps to go by. The house itself is solid, nice woodwork, 3 bed, 1 bath each. Upper rents for $800. Was asking $155,900, took our offer of $150k right away. Assessed tax value $169k, Zestimate, always questionable, $181k. Owner staes that price reduction was for roof replacement. We had our inspection, one furnace 20+ yrs, other 30+ yrs, one water heater 20+ yrs, other one ok. Mostly galvanized pipes with some leaky spots. Both sewer stacks need replacing. Bedrooms each have only 1 outlet, using extension cords, should add at least one outlet per BR. exhaust from furnace leaking into basement. Lower needs new tub surround, kitchen cabinets painted or replaced. We are now wondering if we should come back asking for further reduction based on some of this, at least furnaces, water heater, or ??? Lower will rent for $900. The owner doesn't have money, which is probably why she wants to sell, knows these things need to be fixed and can't afford repairs. We didn't really want to put a lot of $$ into it to start out, aside from initial purchase. No financing this way.
Anybody have any thoughts on this deal?? We would normally flip single fam., but with market the way it is, decided maybe buy/hold cash flow would be good for now. But to much fixing has us reconsidering the idea on this one.
I read a post on here the other day from... sorry can't remember who posted it. But the question was "How do you estimate rehab costs before detailed inspections?" Or something similar to that. One of the responses simply said to estimate from $20 to $35 a square foot and use that number for preliminary estimates.
Keeping that in mind if there isn't enough room to add that number to the purchase price and still cash flow or sell value added then consider offering less but list the repairs that'll have to be done for "safety" reasons. Let her make the decision.
Yes you need to estimate the repairs. Its the roof and plumbing and water heaters and updating the electrical. You say: "Both sewer stacks need replacing. Bedrooms each have only 1 outlet, using extension cords, should add at least one outlet per BR. exhaust from furnace leaking into basement. Lower needs new tub surround"
So get estimates on a new Furnace, and new Bathrooms, updating the electrical. $40,000 sounds at a minimun but ask a contractractor
Zillow says it is estimated at $181,000 so that's a number you can figure from.
At $150,000 cost, plus $40,000 for renovation that's $190,000 total cost. The income is approx $1,700 a month. Sounds like, just at a rough number you should be paying no more then $130,000 for this house, and that is only if the renovation cost will stay at $40,000. You need a more accurate renovation estimate.
Thank you Barbara-on Monday we have several specialists coming to give solid estimates, so we have a real number to approach the seller. I myself was surprised that my husband didn't notice or tally these things prior to offer and inspection. Normally he's pointing these things out as we initially view a property. Now we are looking at the seller accepting a substantial reduction, or we are out the cost of the inspection. If we move forward, it could take longer for the lower unit to be "tenant ready". My husband said he had expected to make some improvements himself, but this goes way beyond...
I'm wondering if the HVAC guy will red tag the furnace, my biggest concern at the moment is for the current tenants' safety.
Well, we got all our estimates for the major work, we were willing to take on some things ourselves, but we came up with a new figure of $129,000. The owner couldn't go below $144,000-so we walked away. The money spent on the inspection taught us a lot, my husband went over every detail with the guy. $600 well spent. A bit of a letdown, but we held firm on that bottom line. @Barbara G. -your estimate was right on!
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