Posted by Julie(MI) on March 22, 2005 at 22:39:23:
I found this site about 9 months ago and have read the success stories and how-to-articles and am so inspired by all of them. My interest is in rehabbing properties. I have been laid off from my job for 3 years now. My husband is struggling to make ends meet and I feel it is time for me to start helping him and I know real estate is the way. I recently joined our local landlords association and everyday I drive through the area that I am interested in and see so many properties that could be rehabbed.
There is a 2bd, 1ba property that the company is asking $9k for. Yes, you read it right, $9k!! Broken windows and roof need to be replaced, wall in the kitchen needs new dry wall due to leaky roof. The 2004 city taxes, penalty and water lien totals $1,669.31 and county taxes and penalty totals $49.73. They say the market value is $45K, but I believe that it is more $30-37K because I grew up in the area and my parents still live there, thus my interest. There is also a house next to it that is vacant and the landlord lives in another city.
My problem to solve is that although I am so motivated and encouraged, I have poor credit (we filed bankruptcy when I lost my job) and no money. All of the family and friends that we have are living from paycheck to paycheck, but we are the ones trying to break the cycle.
Is there anyone that can put me on the right path?
Two suggestions for how to view the possible deal.
You need to make 20% gross profit on the project (not on what you invest but on the total project costs).
Take the present value (real, as-is value), subtract all the repair costs, acquisition costs, holding costs, closing costs, (ALL COSTS) and then pay no more then 70% of the number that is left.
This sounds like your first RE project so be very careful about time lines and estimates for repairs as experience shows that both are rarely what you first think.