Posted by Dan Boullie on June 10, 2003 at 01:33:42:
Thanks again for taking the time to reply, Tim. Those were really creative (and very entertaining) suggestions. Don’t think I won’t make at least one run at them. After all, what is value, really?
Thanks again and best regards,
Dan Boullie
New investor-rehab possibility - Posted by Dan Boullie
Posted by Dan Boullie on June 09, 2003 at 04:29:12:
Can anyone advise? Very rough vacant house in a rough, ethnically mixed area, built in 1938 (good period charm), needs total rehab but good size (4br/1ba, 1450 sf) on a nice lot (.25+ ac.). End of sreet, but not far from RR tracks and main thoroughfare overpass (1/8 mi). Only 1 other rough house, (post WWII flat top) next door, others appear well maintained or rehabbed. Only 2 properties comparable size, age and lot in same zip code (median price 137k, high 249k, median sf around 1000), both rehabbed and sold (pending) for 169k in somewhat better neighborhoods (no RR or overpass). Newer (1960’s+)tract homes in same zip starting about 180k. Listing price is 139k. Owner will carry with 30% down for 4 months. So far-still for sale. Has everyone passed (little potential for flip?)? I think it has good potential for classic period larger home on a rare large lot, and rehabbed, considering location, would easily sell for 169k, and maybe max around 180k, still well below median price/sf for zip. I haven’t seen pest report yet, but older homes usually need some work. Rough guess 30-40k for rehab. Probable cash offer: 180k (max) x .7=126k-40k=86k. Does anyone think this is worth doing? I think there is some retail sale risk at 180k but considerably less at 170k. Any ideas on creative financing offers, taking advantage of the owner financing to get the funds for the rehab?
Thanks in advance,
Dan Boullie
Re: New investor-rehab possibility - Posted by Sean
Posted by Sean on June 09, 2003 at 09:35:42:
I agree with Tim, I think you are comping this wrong, taking an entire zip codes average SQ sale price is not going to give you any sort of realistic comp.
Find more comparable homes in that immediate area in perfect or good condition that have sold, that will give you a more realistic value. Also you have to consider will the RR track and overpass proximity affect the properties value related to the comps you find.
Best of luck.
Re: New investor-rehab possibility - Posted by Tim Fierro (Tacoma, WA)
Posted by Tim Fierro (Tacoma, WA) on June 09, 2003 at 08:31:24:
Nail down that FMV and don’t use price per sqft in a zip code as a price evaluator. When doing so, you end up with 1930’s charmers, 1960’s tract, and many other styles of houses with varying square footages that just won’t really be a comparable house. An in a large zip code, the price per sqft is not going to accurately price your particular property. You need comparables that are 1938 charmers, remodeled and updated, rehabbed, and within the same area to determine the correct FMV of the property.
If you have a property worth 180k, and you use the formula posted; then yes it is a good deal. But nail down those numbers first to insure the numbers are good working numbers.
Any ideas on creative financing etc…? Sure, this site is full of ways to take possession and for ideas of how to fund.
What does the seller want out of the deal? Are they comfortable with $86k? They are the ones you need to convince that your offer is the best they can get for their property.
Re: New investor-rehab possibility - Posted by Dan Boullie
Posted by Dan Boullie on June 09, 2003 at 23:54:28:
Thanks for taking the time to respond with valuable advice, Sean.
Best regards,
Dan Boullie
Re: New investor-rehab possibility - Posted by Dan Boullie
Posted by Dan Boullie on June 09, 2003 at 23:57:26:
Thanks for taking the time to respond with valuable advice, Tim. For the benefit of the beginner rehabbers out there (including me)would you care to offer a couple of creative financing scenarios that you think might work?
Best regards,
Dan Boullie
Re: New investor-rehab possibility - Posted by Tim Fierro (Tacoma, WA)
Posted by Tim Fierro (Tacoma, WA) on June 10, 2003 at 01:07:56:
You won’t know that until you talk with the seller. Will they take $0 down with minimal payments with zero interest? Will they take minimal down, low interest? Will they take your old 72 Ford Pinto, a 6 pack, and 2 free dinners to Taco Bell as the down payment? All these are guesses as to what would work. When you talk to the seller, you will get a feel for what they are trying to get out of the deal. When that is uncovered, you will try to solve that financing arrangement to see if it can work for you. If the seller is adamant of full price all cash right now; then you will need to review your financial picture to see if you can get the cash on your own, lender, or temporary funds. Maybe you can get the property with an owner carried note; if they own it free & clear, then use personal funds for the rehab or extended credit measures. Maybe an equity split with the seller would work, but again you won’t know until you talk to them to see what they are after in the deal. Go talk to them, see if the numbers add up, and come back with what has to be accomplished in the seller’s mind to make it work. You will be in a better position to ask questions for a solution than the probable good deal situation you are looking at now.