Hi all! I am presently under contract for a 2/1 with unfinished basement property located in Morrill, NE. I want to flip the home. It was FSBO for 38k, and I negotiated price to 22k inclusive of past due real estate taxes at about $1.5k, so the seller would receive the net difference. There was a tax certificate sale for TY2019 that I will be clearing up/having released in a day or so, already checked with County. Seller's grandfather left her the home via QCD and she is selling it because she cannot keep up with this home and her own, plus has unforeseen medical expenses. No title issues.
Other details about the flip property:
Tax appraisal is $40k, Propstream values it at $65k, and comps for other 2/1's are about $92k. The town itself is very rural, about 1k residents, which scares me a bit, but other close-by towns hold more residents. I am originally from NYC and now live in Long Island, NY and I worry about the micro population factor.
I ordered a home inspection, and also had property walked by a local contractor. Inspection revealed the home has a chimney vent issue and some exposed nails on the roof which was fully replaced 1.5 years ago, all fixable. The rest is mostly cosmetic. Rehab budget is $35k and will allow me to stick a 3rd bedroom in basement area for a better ARV of $100k (this is a conservative figure).
I am losing sleep on this house since it's my first deal and I need to make sure I am not overlooking anything. I have $100k in savings but horrible credit so I plan on doing this all in cash. I checked with a few HMLs and the loan amount is either too low and frowned upon, or otherwise possible but expensive as the HML will take a huge chunk out of my potential profit. Someone please tell me if this remote flip sounds like a stupid idea, because I keep analyzing it as a slam dunk. Help, please. And thanks for reading this far!
@Issy Mercado , the one part of your plan that concerns me is adding a bedroom in the basement. There are two reasons I am concerned.
First, if it is an older home they often didn't make basements with the intent of finishing them. So, sometimes the headroom isn't sufficient (7' minimum finished ceiling height) or the basement is damp because there is no drainage etc around the foundation.
Second, you need egress for a bedroom in case of a fire. So, unless it's a walk-out basement or part of the foundation is above ground with a full sized window that could mean excavating around the foundation and cutting an opening for an egress window for that bedroom.
Hi Kevin, excellent point! These were also my initial concerns, but the seller told me there was a bedroom and half bath downstairs when she was growing up and until very recent. The home itself was built in 1935. Before becoming ill, seller was rehabbing the home on her own, so there are some awkward tiling and flooring issues to be resolved, but she also stripped the basement as well. There are 3 egress windows in the basement, all in need of replacement. The basement has approx 8ft headroom and there is a drain where the half bath situation was prior. I will likely see that drain area converted into a laundry closet, cheaper and more practical than installing a pump and a tiny closet bathroom. Contractor is also extremely confident we'll land the bedroom in basement permit, but I trust no one these days and confirmed the same with the County, so it seems like a go.
I'm just experiencing analysis paralysis because this is real money going out the door and I am effectively freaking out. But my gut says 'do it!'.
@Issy Mercado You do have to be cautious. A lot of these little towns are losing population. Averaging -3% growth. Even Scottsbluff is losing population. Who are you going to sell the property? Exit strategy. Are you going to recoup all the money you put in to fix the property? What are days on market?
@Issy Mercado "Tax appraisal is $40k, Propstream values it at $65k, and comps for other 2/1's are about $92k. The town itself is very rural, about 1k residents"
Nothing against propstream but in this case I would give it almost no credibility. Tiny towns like that present a number of problems to anyone or anything attempting to determine value. In fact, I might even argue that if you cannot find at least comparable sales in the past 12 months you should seriously consider investing elsewhere. If there aren't very many comparable sales, an appraiser might arrive at a very different opinion of value to yours.
I live in a village of under 200 in southeast Ne. There are towns around me about the size of Morrill. I think I would just make sure the roof and foundation are in good shape then sheetrock where necessary to fix interior and then paint inside and out. Yes, there are very nice houses in small towns but there are also dumps. Its more difficult to hide the dumps in small towns. As this is an older house, it's nice to see it restored but don't get carried away as your profit margin could take a significant hit. Good Luck, Dave