profit on rehabs - Posted by Dana

Posted by Ron (MD) on February 01, 2002 at 17:49:42:


Actually, I bought this one in November.

I haven’t had a problem with seasoning. There’s one lender here in Baltimore that won’t lend on a house in the city that has been seasoned for less than a year. I haven’t come across any others that prohibit them. Sometimes lenders (or their appraisers) are a bit nervous (especially since the price has usually tripled or quadrupled in a few months) and they’ll ask for a scope of work to include in the file. I do a comprehensive rehab, so the house pretty much speaks for itself.

I think seasoning is more of an issue when you buy a house way below market, then try to sell it without doing significant repairs (even if it needs no repairs). Banks don’t seem to want to acknowledge that an investor can buy wholesale and sell retail…legitimately.

Ron Guy

profit on rehabs - Posted by Dana

Posted by Dana on February 01, 2002 at 15:11:50:

Just curious…for those of you that buy, rehab then sell, what do you expect as profit? Is there a set amount or do you take the first offer? Do you set your price below FMV to get rid of it faster or set it higher because its nicer than others in the area? How long do you let your properties sit before lowering the price if you don’t get any offers?

Re: profit on rehabs - Posted by Bud Branstetter

Posted by Bud Branstetter on February 01, 2002 at 22:31:14:

The typical is to make 20% of the sales price as profit but not less than 10-15K. That way if you make a mistake with an unforseen expense you do not get burnt. You should know what you can get as a sales price before you buy. You should know what needs to be done beforehand.

It can become an art to determine how much to fix up versus leave it for them to do. Some of it depends on if you are leveraged or in to it for all cash. You generally can’t go wrong it you add some pizzaz items and set the market. You can visit your competition in the area to see if you are priced right and how much nicer you offering is. The last few years have been a sellers market so I haven’t had to use realtors or wait long. With a sign in the yard you will build a buyers list before you get the work done.

Funny you should ask… - Posted by Ron (MD)

Posted by Ron (MD) on February 01, 2002 at 16:34:32:

I sell starter, blue-collar homes in the $60k-$75k range.

I know my market, so I know the selling price before I make the offer to buy the place. My pricing is fairly simple…I charge the absolute top price I think the house will appraise for. After all, my house is completely rehabbed and it’s doubtful that there’s a nicer house nearby.

I don’t discount houses to move them faster and I don’t discount them if they are slow to sell.

My reasoning is simple. My buyers are not very price sensitive. They usually aren’t house shopping with realtors, so they aren’t comparing my houses to any others. So long as the monthly mortgage payment is not much higher than comparable rent, price is not an issue. Finally, if I cut the price of a house from $65k to $62k, it means their monthly payment is something like $22.00 lower, which isn’t a big deal to my buyers.

Getting to the subject line for this post (“funny you should ask”)…I have a house for sale for $65k. The work was just finished a week ago, and I’m having the first open house tomorrow. Well, I showed it to someone the other day who already has loan approval from her bank. (Most of my buyers have stinky credit, so finding someone with loan approval is very rare…and exciting.) Anyway, she really wants the house, but she wants me to drop the price a few thousand dollars…just on principle. I’m taking my usual hard line and told her that “we” just don’t reduce our prices. We price them fairly…they always appraise…and they always sell. (I did tell her I would make a minor concession that I usually don’t do…a $500 appliance allowance.) This was a conversation we just had yesterday. I’ll bet a house payment that she ends up buying the house (it’s really, really nice).

By the way, this is the first buyer I’ve ever had that tried hard to negotiate price. About one in five will ask if the price is negotiable…and I just say “no”, and explain why.

Ron Guy

Re: profit on rehabs - Posted by SCook85

Posted by SCook85 on February 01, 2002 at 16:25:20:


When I first started rehabbing homes, I used to price all of my homes just below FMV to get quicker sales. The more I do this, the more I want for each home. I now price my homes above FMV and can justify it with the quality of my rehabs. I usually don’t have to wait more then a week or two and I have multiple full price offers on my homes.

As far as the amount of profit. I like to make as much as I can.


Pricing is important… - Posted by David Krulac

Posted by David Krulac on February 01, 2002 at 19:30:28:

I feel that pricing is extremely important. It is very rare, like a snow ball in h@ll, that we negotiate the price down. We establish a fair price, where we are giving a buyer value for their purchase price. We try to not price too high and not price too low. We don’t discount, we sell a lot and all are at full price. We know our market as you know your, which is a key to pricing right and suceeding at real estate.

David Krulac

Re: Funny you should ask… - Posted by Jerry

Posted by Jerry on February 01, 2002 at 17:39:39:

Ron, if she’s pre-approved, does her lender care about the fact that title hasn’t been seasoned for a year? I’m assuming you’ve owned for less than a year.

How do you normally get around this?