I found a property in a pretty rough/up and coming area in Tampa that I need help with. I have estimated ARV as roughly around 185K. I am unable to view the inside of the home, so I have no clue what rehab costs may be. I am thinking if the rehab costs are at most 100K, I can comfortably have a MAO of 55K. Of course, I would start negotiation around 45K or so.
If any of you can help to guesstimate what's the worst possible amount to spend on rehab, OR if you can tell me what you've done in situations like this, OR tell me if I'm way off, please leave a comment below.
Thank you guys!
Would you buy a a 40,000 $ used car with a big tarp draped over it so you can’t see the thing ?
Crazy anybody would do such a thing to me
Has a previous inspection been completed that you could review?
Originally posted by @Amber H. :
@Dennis M. Who would? I'm just trying to better understand what to do in these types of situations.
@Krissy Key I don't think so - it was bought in the 80s and the guy has not done much with it since then as far as I can tell.
So it has sat vacant for around 35 years? If that is the case I would offer lot value only. Actually, I would figure up how much it costs to tear it down and remove the debris, then subtract that from the lot value and that would be my offer. Minimize the risk as much as possible.
@Amber H. oh! If that is the case then that changes everything. I would say its probably not that bad then.
OK. Most important question that I didn't see asked.
Why can't you see the inside of the house?
@Amber H. Either get inside or walk away. Easy.
I make all my offers before I see the inside of the house anyway, so this really doesn't matter to me. Make the offer based on the needed rehab being what you can do...and what that will cost you. Make sure the offer has a contingency that it is based on inspection and approval by the buyer or buyer's agent. Don't put any Earnest Money down.
After you inspect the property, if the rehab will cost more than your estimate, withdraw your offer.
It's the price the seller pays for not giving you access.
@Alex Presnell I always err on the side of caution. I asked a lot of investors for a "full gut" rehab price estimate, and most all gave between the range of 60-75. I added closing costs and unknowns. 100 is way too high, but it was a good place for me to start without any base to be conservative.
@Joseph ODonovan @Joe Villeneuve The owner has health issues. Their family member is speaking for them and does not have access/does not believe they will get access. Also, Joe - that's a great suggestion.
@Amber H. - You have to just explain to the family member that you really need to see the outside. If you can't see the inside, you are going to have to assume the worst on a lot of the unknown variables of the inside. Someone of those have been mentioned above, plumbing, electrical, anything.
Can you go (with the approval of the family member) and at least peek in any of the windows and walk the exterior of the property?
I am local, if I can help in any way let me know.
This really sounds like a bad first deal. Walk away. There are too many things that can go wrong here. If you had five or six renovations under your belt and some valuable personal rehab experience, you could jump on this deal, but the more you look at it, the more it appears to be a soul-crushing nightmare waiting to happen for a beginner investor. This is your first concrete ARV, your first rehab, your first everything, and you'll be going in without knowing anything? This is LITERALLY the blind leading the blind.
Not worth it.
This is a good question.
You see seasoned investors purchasing homes at the auctions site-unseen ALL the time. However, I've always wondered myself: "How are they comfortably able to buy these things without seeing the inside?"
On the property that you're looking to make an offer on, is it vacant? Can you drive by the home? Can you walk in the back yard and inspect the exterior? Can you peak through the windows to get a better "feel" for the interior condition? If you can answer "YES" to these questions, that could help significantly.
Are there basements in Florida? If so, you're guestimating just got a whole lot more challenging. Potential foundation issues can usually be spotted from cracks in the exterior brick, but you'd really need to walk the house to see if you feel any sloping. If the home has a basement however, there are too many unknowns for me to buy site-unseen. Unless it was a hellofadeal, I'm not sure if I could do it.
My suggestion is: DON'T BUY IT. There should be plenty more opportunities out there where you CAN get access to the property. Unless you have crazy experience and know exactly what to look for, I wouldn't do it.
Hope that helps!
I have bought 2 houses like that , I looked at the outside and thats it . I just figured it was a hoarder house and a complete gut and made my offer . The first was a total gut , nothing to save inside at all . The second was a nice suprise , a little trash , everything worked and a cold 12 pack of beer was still in the refrigerator .