Comping a property being rehabbed?

Question

I have an appointment coming up with an investor who is tired of fixing up a property that was bought as a flip. Him and his son got this property together for the son to get his feet wet in real estate. They’ve owned it just for over a year now and the house is still in the middle of being rehabbed. How would i go about comping this property with it still not completed? Would i just subtract out the repairs they’ve already done to the house from the initial repair cost they’ve came up with before purchasing? Or just calculate repairs as the house would need a full rehab?

Alvin Sylvain · Answer

BP has some webinars and/or podcasts about estimating the rehab costs. Get as much information as possible! One unanticipated disaster can throw your whole plan down the flooding toilet!

Tyler Meade · Answer

@Alvin Sylvain appreciate your feedback! That was another way i was thinking of going about calculating repairs. Just wasn’t for certain because it’s my first property that i have interest in that’s already in the middle of a remodel. Yes, the father sounded pretty eager but i’ll have to hear the sons concern. Thank you for the help i’ll let you know how it goes!

Alvin Sylvain · Answer

Determine the value of the house already fixed up, ready to sell. That's where you "comp" against other similar properties in the area. You comp the fully-rehabbed, turn-key, ready to sell property, assuming probably that the comped properties were also turn-key, ready to sell (because they sold).Subtract any and all repair/rehab costs still required. Whatever is done already is done already, and as long as it was done right and you don't need to re-do it, it doesn't matter.Subtract holding costs to get those repairs completed. Somebody, probably you, has to pay the mortgage, taxes, insurance, HOA, etc., while waiting for completion.Subtract a modest profit for you. Or a mongo profit, your call.Subtract some room for negotiation.The result is what you offer.They've had it for a whole year? I don't think they've been serious about it. It should be possible to rebuild it from scratch in that much time. Take that into consideration in your negotiations -- they're probably eager to get rid of it.