Best of luck to you Denyse. I'm sure you will do just fine in whatever you choose. It's always good to have a partner who sees things differently than you but someone you still get along with well. Whether or not this person is a friend, husband, Realtor etc. as long as they are successful in life and finances you will have an extra pair of eyes and will be much less likely to make a decision based mostly on emotion instead of what's best for you. You probably already know this though, so enjoy your buying and selling.

By the way John (Real Estate Pro in Dayton), the link you have in your post leads people to a non existent site. (the domain name MilionaireSystems.com has expired) I think you meant this website.

http://www.millionairesystems.com/msys/index.html (just missed a letter "l" in the name)

Fri Apr 4 2008, 09:25

The question is: How much would the house, in fixed-up condition, sell for? You say you'd like to sell it in the $800,000-$900,000 range. OK. But Tman says you'd have a hard time getting $800,000, and adds that properties aren't moving at $700,000 or less. I don't know the area and Tman obviously does. So let's say you'd be able to sell it in 30-60 days if you priced it at $650,000.

You have to factor in transaction costs (some purchasing costs, the selling costs, the holding costs, the financing costs). Investors use a factor of 0.7--70% of ARV (after repair value). So 70% of $650,000 is $455,000. Then you subtract the renovation costs. We'll go with your $150,000. We come up with $305,000. That's your MAO--your maximum allowable offer. Pay no more than that, and hopefully less, so that you can handle all the transaction costs, the holding costs, the rehab costs, and still sell the property quickly.

So Hi--who can be cynical but wry--is right on the mark in this case.

You also need an exit strategy, which you don't have yet. You say you'd sell it (which is what I've based these calculations on) OR rent it OR make it your personal residence. Those are three very different objectives. Yes, you should have a back-up strategy, but focus on one. Doing a rehab for a rental is very, very different than doing a rehab for a resale. (Rehabs for rentals are less expensive, using lower-quality materials.)

But be careful of the rental backup strategy. Even if you bought it for $305,000 and rehabbed it for $150,000, you'd have $455,000 sunk into the property. And if that's your fall-back position, you'd probably have it on the market, trying to sell it, for 3 or so months. That adds to your holding costs. Then, to finance that, you'd be paying over $3,000 a month. If you rented it for $2,000 a month, you'd have a $1,000 a month negative cash flow--after taking a $9,000 hit while it sat vacant. Can you handle that?

If it's a really nice property, and you want to rehab it ($150,000 is a big rehab), then buy it as cheaply as possible and rehab it to live there. You might as well enjoy the fruits of your labor while you wait for the market to strengthen.

Hope that helps.

Mon Mar 31 2008, 10:46

Tman makes great sense. There are great opportunities in other, more active places, for that kind of money. Good hunting!

Mon Mar 31 2008, 06:14

Good morning Denyse Storey,

Cleveland Hts has some beautiful homes, no doubt ...

$470ish is probably a very fair offer ...

The hard part is trying to get $800ish for it after the renovation in a short period of time - especially in Cleveland ...

You have beautiful $400/$700,000ish homes still sitting in Medina county (fastest growing sector of the state) after 15 months on the market .. you still have stunning $400/$700ish homes still sitting right on the lake in move-in condition in Bay Village for the last 12 months..

As far as depending on the rent, you can lease the penthouse at the Winton Place for $1,900 a month ...

I always loved Cleveland Hts, but your biggest competition today is going to be Mayfield Hts because of the better schools and the safety issues ... I don't think I would be going that route with big money.


: ^)

Mon Mar 31 2008, 04:24

There are beautiful homes in Cleveland Heights. $470-480k is probably a reasonable offer based on the square footage but I would have to see it to be sure of my advice. It is particularly slow in the Heights area right now so I would not advise your plan above without patience. Renting is always an option there until the right buyer is located.

Sun Mar 30 2008, 22:06

Denyse,

The best thing to do is to get with a real estate agent who knows that area well. It would be unfair for me, in Dayton, OH to answer your questions, because frankly, I just don't know your market. ALL REAL ESTATE IS LOCAL to the location it is in, PERIOD.

A good professional will help you determine how much to offer, what the future repair value would be, and how long it should take to sell in the market today.

I will reccomend a spreadsheet that you can buy for $99 throughhttp:// www.MilionaireSystems.com developed by the guys who wrote the book FLIP - The spreadsheets will help you claculate repair costs at EVERY step of the way, a maximum amount to pay based of off needed repairs and profit margin desired, as well as a rental analysis on each property. My investors found this to be an invaluable too. It is $99.00 and NO, I do not make a commission off of it, I simply think it is a GOOD and NECESSARY investment into your business, as well as developing a relationship with a local professional agent.

Good luck to you!

Sun Mar 30 2008, 20:10