ADVICE WANTED - Options for 91k purchase with 25k of work
I'm all ears for opinions on this one. This is an 1880's Single Family Home in Des Moines, Iowa. 3 Bedrooms but has 2 other rooms the could be considered bedrooms. Our goal is to get a house every 6 months, building up a nice portfolio of homes that we can then sell and upgrade into commercial properties.
Property #3 for us just got under contract a week ago.
Purchase: $91,500
Expected Monthly Rent: $1,100
Pro Forma Cashflow BEFORE Renovation costs: $193/mo
We were just quoted $23,000 of work. Detailed below. Considering doing a cash out refinance on one of our other 2 properties to pay for this one. OR include the 23k in our loan for a 80% loan on a "purchase" of 91.5 + Repair Costs. Probably will do a little bit of both.
Plumbing - $6,000
This include a new gas water heater, adding venting to the kitchen and bathroom, fixing the shower drain (plumber said it was too small), fix the ejector pit (what is this?), sump pump, and plumb laundry into the ejector pit.
Electrical - $1,200
Pretty straightforward, replace some breakers, ground some outlets, install a fan in the bathroom
Foundation and Plaster Ceilings - $15,000
A retaining wall needs to be built in the basement and backfilled in order to prevent any issues with the soil washing out (!). Some of the plaster ceilings are falling down so going to cover with drywall.
Wall Paper - ???
Wallpaper throughout the house. It has been recommended to us to put thin drywall up over the wall paper and paint instead of removing the wall paper and painting. Not sure how much this would cost?
-------
We are planning on renegotiating a lower price or walking. What would you do? Financing the repairs really cuts into our cashflow, but would it still be worth it for the value add an appreciation? OR, would it be better just to pay more for a better condition property with an equally non ideal cashflow? Generally, we try to get $200 a month. OR, should we just wait for the market to cool down a little bit? (Don't really want to wait).
Thanks for reading and for sharing your thoughts!
Aaron