Posted by ABSTRACT on January 23, 2005 at 23:20:14:
DAVID YOU CAN FIND THAT SITE AT, WWW.GOTITLE.COM
Newbie Rehab Help - Can new paint & carpet- - Posted by David
Posted by David on January 21, 2005 at 14:14:42:
Hi, Thanks for taking a look at my question…I want to get into rehabbing homes,and i was wondering can painting the inside walls of the property, cutting the grass (simple yard work) and brand new carpet and kitchen and bathroom linoneum make a big difference in the appraisal before and after for a home? Can doing those simple things drastically increase what the property is worth?
I am wondering this because i have contact with a real estate agent that can get lists of HUD properties that need work and are beingsold aas is, and he is willing to work with me. He gets comps in the areas and the homes near the HUD homes being sold are a lot higher in price than what the HUD home(s) are being sold for.
So I am wondering can putting the new carpet, paint, etc on/in the property make the home be worth a lot more? Does it make the property worth a little more or does doing something as simple as that make the price jump up a lot?
ANy feedback on this is Greatly appreciated!
Have a nice day/night.
-David
Re: Newbie Rehab Help - - Posted by rehabber
Posted by rehabber on January 21, 2005 at 16:55:37:
To answer your question - yes.
While most of our rehabs are more extensive, we’ve done
some ‘light’ rehabs that increased the value.
Last year we bought a townhouse, nice area, but ‘beat’
inside. Got the place for $60k, put $8k into it
(paint whole interior, new carpets, new vinyl flooring,
new kitchen appliances, new window treatments, 2 new
toilets). It’s now worth, conservatively, $135k.
I’m renting it out because it cash-flows, but I could
sell it if I needed the equity money.
YES! Was: Re: Newbie Rehab Help - - Posted by Sgt. Sausage
Posted by Sgt. Sausage on January 21, 2005 at 16:01:52:
It sure can. We put just over $2,300 into a condo we bought last summer: paint, wallpaper, carpet, a few light fixtures, a few updated plumbing fixtures, some new thresholds, and some flowers for the front yard (approved by the association of course (!)). Took us 4 weekends to commplete by ourselves (me + wife) – no contractors.
The difference in pre and post appraisals was over $14,500.
We’re not selling it – we rent – so it’s a paper gain of over $12,000 for 4 weekends of work. I wouldn’t even call it work, cause we had fun doing it!
Yes - Posted by Kevin IL
Posted by Kevin IL on January 21, 2005 at 14:39:41:
Yes, it can make a big difference in the value. In my area, HUD homes have not been that great of a bargain…but deals can be found. Just make sure that your comps are accurate. Also, you’ll need to take into account your holding costs, loan expenses and re-sale costs. These can quickly chew up a lot of the anticipated profit if you don’t plan carefully. Good Luck.
Re: Newbie Rehab Help - - Posted by David
Posted by David on January 21, 2005 at 17:19:56:
Hi, thanks for your help. You mean that with the $8,000.- you put into the home it more than doubled in value?from $60,000 to $135,000 - WOW!
Q- Does the increase in value due to fixing up a home differ from area to area? With that i mean different areas around where i live & area meaning from state to state etc?
What i am trying to see here is - i know a realtor i just met,that is doing rehabbing and buys HUD homes for lets say $30,000 and puts $5,000 to $10,000 into them, and he says the comps (for example here) in an area may be $75,000 - and he then sells the home for close to that amount.
He is offering to help me, and i just called the lender he works with to get pre-qualified for a loan(s).
The lender as i was told by the realtor offering to help me gives 70% & 80% & 90% of ARV of the HUD homes.
That will give me cash at closing and cash to do the work and cash for the holding costs and etc.
I am thinking if i do things right that i will be able to keep some of the cash at closing for profit, use some of it for the rehab work, and then eventually when the rehab work is finished sell the home hopefully close to the comps in that area and take some profit from the selling too after also paying back the lender and etc.
Does this sound like i am on the right path here in your opinion?
I appreciate your help\advice. I really really want to get started, and tell my boss “i don’t need this job any more!” *laugh
If the lender i am hopeing will work with me wont help me , i know of another investor/hard money lender that lives in the same town as me that i have been in contact with, and maybe i can get a hard money loan.
anyway, your advice here is greatly appreciated!
Have a nice day!
-David in PA
Thanks for the help & advice everybody! - Posted by David
Posted by David on January 23, 2005 at 09:49:41:
Hi!
I just wanted to say thanks to everybody for the help and advice.
Any other advice on the subject - my ears are open!
-David From PA
Re: Newbie Rehab Help - - Posted by rehabber
Posted by rehabber on January 21, 2005 at 20:57:30:
David -
The money is there. Now, I have to tell you that the
deal I described was one of our better deals to date.
More typical for us is this scenario:
We get a place for $60k, put $20-25k into it
(major rehab- new kitchens/baths/plus paint/carpet)
then sell it for $110-115- make $25-30k profit.
Still, that’s decent money, in my book, for
2-3 months of work (I don’t do the labor either).
My first example was to keep your motivation up.
Still, I’ve been doing this 3 1/2 years.
I didn’t just dive into it- I must have read 10-15
books on the subject before starting, then carefully
selected the first place to rehab. Real estate
investing isn’t difficult, but it’s not ‘easy’
either.
“It isn’t difficult” - what I mean is -
it ain’t rocket science - study, do your diligence
and you’ll be okay.
“It’s not easy” - what I mean is - it’s not instant millions or instant anything.
Like anything else, it requires “work”. I look at
several homes per week. Phone calls, marketing,
tracking stuff- all takes time. It won’t be
“work a few hrs per week and make big bucks” like
some gurus want you to believe. But. if you go about
it in a calculated systematic manner, you can make
money. Best of luck to you in your endeavors.
Re: Newbie Rehab Help - - Posted by Lyal
Posted by Lyal on January 21, 2005 at 19:03:27:
David,
Before you jump into anything here you need to spend some time learning the value of houses in your area and study some books / courses on rehabbing. There are plenty of posts in the archives from people who either jumped in before they were ready or were led by someone who was going to “help” them. The help had to do with getting the wallet out of their pocket.
DO NOT depend on anyone elses opinion on the value of properties or repairs or chances are you’ll be in for a bad time.
All the best, Lyal
Re: Newbie Rehab Help - - Posted by David
Posted by David on January 21, 2005 at 19:15:13:
Thanks again for your advice! How do i find out ‘for myself’ what the property values are in an area?
Also, i have been studying real estate for some time now…i just bought the Mike Britton rehabbing homes for resale video, and i am reading the book buy it fix it sell it: profit.
I understand the basics of the whole rehabbing thing.
If worse comes to worse i can just sell the rehabber (my first one,ihave to just jump in sometime and do my first deal, right?) i can just sell the property and take a small profit or at least break even (i hope) - after all the property should be worth more if i do fix it up?
I guess it is a buy low and sell high kind of thing with rehabbing? And knowing the numbers,costs like holding costs fixiing costs and tallying them into the mix?
Anyway, how do i go about knowing what houses are selling for (for myself instead of taking somebody else’s word for it) in an area so i can be more certain when i run the numbers on a deal?
Again i do appreciate your time in answering my questins, it is a big help.
-David
Re: Newbie Rehab Help - - Posted by ABSTRACT
Posted by ABSTRACT on January 23, 2005 at 20:30:17:
WELL SINCE IT WAS NOT MENTIONED, I THOUGHT I WOULD KICK IN MY 2CENT, IF YOU REALLY WANT TO TAKE THE GUESS OUT, THE EASIEST WAY. YOU SHOULD OPEN A ACCOUNT AT FIDELITY DATA QUICK, OR SOME SUCH COMPANY, PUNCH IN THE PROPERTY ADDRESS AND YOU WILL GET PROPERTY PROFILE AS WELL AS TRANSACTION HISTORY, TAX STATUS AND ALL THE COMPS. IN THE AREA.
Re: Newbie Rehab Help - - Posted by Lyal
Posted by Lyal on January 22, 2005 at 07:58:05:
David,
Glad to hear you’ve invested in some good rehabbing educational materials.
The key to knowing the value of houses is to look at a LOT of them. Warning, this may take some time. Go to open houses, look at FSBO’s. Take some digital pics, get their brochures etc. Keep a file or loose leaf book and track what they sell for. After a while you’ll be able to anticipate the price within a few thou.
As to the property you are looking at now, drive around the neighborhood and find a bunch of houses that are similar, head down to the courthouse and see if any of them have sold in the past 6 months and what they sold for just to see if you’re in the ballpark. If you sign anything up, do it contingent on “satisfactory inspection by business partner” or somesuch. Get a couple contractors, and take them in and get estimates (note you’ll be using handyman wherever possible so your actual repair costs will be less).
The “Buy It, Fix It” (I have that one in my library) book will tell you lots about how to figure repairs, holding costs, re-marketing costs, etc
NEVER assume you’ll break even on any one of these as it always costs more and takes longer than you think to do. If you keep it in mind to make at least 10k, you’ll probably break even.
Remember, most realtors, owners, (and new investors) grossly underestimate the cost of repairs. I’m just finishing one right now where the owner thought it would cost 3k to fix and it was actually 30k (I knew what it would cost).
All the best, let us know how it goes.
Lyal
Re: Newbie Rehab Help - - Posted by Mike-OH
Posted by Mike-OH on January 22, 2005 at 07:12:38:
David,
To know the value of houses in your area, you need to personally look at dozens or maybe a hundred of them. Go to every open house, have your realtor show you a bunch of houses - LOOK, LOOK, LOOK! As for the appraised value of a house before and after a cosmetic rehab - NO, doing a little cosmetic rehab does NOT have a significant impact on an accurate appraisal. Appraisers set value based primarily on comparative sales of equivalent houses in the area. A 3 bedroom, 2 bath in the same neighborhood with equivalent amenities should appraise nearly the same regardless of one house needing paint or carpet. These things can have minimal effect on the appriasal, but not a significant effect. What actually changes with the cosmetic rehab is the market value of the house, meaning what someone will actually pay for it. You may pay 30K for a 70K house because it needs cosmetic work - these types of houses are easy to find. Then, put in 5K to 10K of rehab (carpet, paint, water heater, vinyl floors, sinks, cabinets, etc) and you once again have a house that will actually sell for its appraised value of 70K.
Again, I agree with the other posters. You definitely should be able to spend 10 minutes looking at a house and be able to accurately determine its ARV value. Look at 100 houses and you should have it!
Then, get out there and do a deal!
Good Luck,
Mike
Re: Newbie Rehab Help - - Posted by David
Posted by David on January 23, 2005 at 21:08:29:
Thanks for your help. Do you know what the website address is for FIDELITY DATA QUICK - i tried to do a key word search and i cannot find it. That seems like a great tool to be able to do that with a property.
thanks
-David