My wife and I found a home for 240k off market in a neighborhood(like b- c+ neighborhood) where homes are being listed at 250k-275k in MN (Don’t forget people are over bidding homes 15-30k on homes right now. Maybe more with certain homes) House needs work but nothing to huge. I am a plumber and can handle most projects myself. Also I am connected to many men in the trades which could lower my cost and help me or give me knowledge. sewer line to street may have roots in it and potentialy may need to be replaced or snaked. Which I can actually do myself. I can use a mini and fix it too and dig it up. (Have experience in locating and digging up locates) roof has a potential small sag but my friend works in roofing company and can help me fix it. I can remodel the bathrooms(they need to be fixed and remodeled but I can do all of it) the house wreaks of pee and it needs to be cleaned of the piss smell. Also everything’s need to be repainted and trim needs to be replaced. Was just wondering if an experienced investor could help give me with advice on if this is worth my time. We want to fix this home up to force equity on it and potentially sell it for more or rent it and hold it for a few years then sell and trade up to more rental property’s. Thanks any advice would be helpful
Based on what you've described I don't see enough meat on the bones at a $240k price point even with you doing the work yourself. Your time has value as well. If you were talking $200k then it sounds like a go, as a rental. This is not any where near a flip at this price.
I agree with @Jonathan Styer and would say you probably need to be under 200k to make it worth it since you don't know what you don't know as a new investor and just because you know people in the trades does not mean those will be deals and they will do that work on their off-time which means delays. If the sewer line needs to be replaced, you could be looking at 10-15k, if you weren't in the trade, but there are permitting and street closure issues for connecting to the street. It sounds like you are describing a wreck of a property with rose-colored glasses to me. Urine doesn't just disappear.
What would it rent for? From the equity stand point no meat on the bone at 240K. Now if ARV is 300K+ then that's different. Are you able to verify comps with an agent?
@Matthew Johns , I will echo everyone else. Let's assume you can sell for $305k ($30k over list on the high end of list). If you list with a typical full service agent, you have about $18k in commissions. Less a couple thousand in other closing costs, you are down to $285k in a best case scenario.
Do you have $240k plus renovation costs available in cash? If not, you will have loan costs that could run you anywhere from several thousand to over $10k in financing costs. But let's assume you have the capital available in cash.
I don't know what "needs work, but nothing too huge means", but let's assume you need counters, cabinets, and appliances in the kitchen to get that $305k price. Even if you do all the work, you could easily be 5-10k in materials, for basic level finishes.
Millwork for a full house can be several thousand in materials. Just buying 5 gallon bucks of paint for full interior paint will cost you a few thousand.
And as noted, even if you supply the labor, which is a big savings, there is still cost to rent equipment, new PVC, tie-ins fees, permit fees, etc.
If I were presented the deal, I would pass.
@Jonathan Styer well we also plan on living there for about 2 years to 3 does that make the situation sound better? Then we want to rent it after
@Caleb Brown it would rent for around 1700-2200 we also plan on living there for 2-3 years then we plan on moving after and using it as a rental
@Evan Polaski we also plan on living there for 2-3 years then plan on moving onto another property. the main goal is to make it tenant proof and ready to rent. With that time frame do you think it’d still be a bad investment? This is also our first home.
@Jonathan Greene would it make a difference if we plan on living there for 2-3 years and doing everything Over that time frame? Cause afterwards we plan on moving to another home and making this house a rental.
If livable comps are in the $250-270k range this is priced too high at $240 if it needs all this work.