I'm looking to rehab, what sale price should I be aiming at for the fastest sale?

Asked by Jennifer, 49301 Tue Jul 24, 2007

I'm looking in the GR area and want something I can afford to rehab, but as importantly, I want to sell it in the end. I have found many $20,000 houses with great potential. Add $20,000 in rehab and the house would still be attainable for people in the middle income range. With the prices available, builders looking for work and housing needs this seems like a win-win situation. What do you think?

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11
Melinda J. R…, Agent, Hudsonville, MI
Tue Mar 25, 2008
Jennifer, the key is to buy smart. I have helped investors buy many properites. It is inevitable that you will run into more problems than you originally anticipated. However, buy smart and plan for extra costs that may come and you should be fine. You will be putting a very nice, completely remodeled home on the market.

Rely on your buyers agent. My investors will ask me on their favorite properties to run comparisons of when it is completely remodeled what I believe it will sell for. This is a little tricky because the market continues to head down. However, I like to give the conservative answer. In this market it may take you sometime to sell them, but at the end of the day there certainly is potential to make a good profit!

I hope this information helps! Best Wishes!
Web Reference:  http://www.gomelinda.com/
1 vote
Don Tepper, Agent, Burke, VA
Tue Mar 25, 2008
What you should do--what real estate investors do--is approach it like this:

First, look for so-called "bread and butter" houses. Decent houses suitable for employed, stable, middle-class families. Not too upscale. And not shacks in poor parts of town. Good location, good houses. That's what you want to rehab.

Second, determine what the house would sell for in good, fixed-up condition, in 30 days. To determine that, ask one or more Realtors. (In return, you should consider using one of those Realtors to sell the house when completed. It's both a reward and a challenge: "You said you'd be able to sell it for $X within 30 days. Now, make it happen.")

Third, determine the repairs and rehab need on your selected house. Get a contractor (or two) in there to give you estimates. Include everything. Paint, carpet, windows (if needed), roof (if needed), HVAC (if needed), rehabbed baths and kitchens as appropriate, and so on.

Then use the magic formula: ARV (after repair value) *0.65 minus repair costs equals your MAO (maximum allowable offer). So, to work through some numbers, let's say a house would sell quickly for $60,000 when all fixed up. Multiply that by 0.65 (or, take 65% of that figure). That brings you down to $39,000. Then, subtract rehab costs. Let's say that's $20,000. So your MAO--the maximum you should spend--is $19,000. That formula accounts for a variety of transaction and holding costs, plus a profit. And if you use that formula, you should also be able to get a hard money loan (a loan based on the equity in the property, not on your credit), if you choose to go that way.

But remember the steps and do them in the right order: Find a bread-and-butter house, determine its after-repair value, determine the repair costs, then buy the house for no more than the MAO.

Hope that helps.
0 votes
Michelle Gor…, Agent, East Grand Rapids, MI
Fri Jan 18, 2008
If I was going to buy a home to “flip”, I would do some market research before buying. I would get static’s of what price range is selling the most…………then take that number and find out how long they are typically on the market and the percentage of asking price they get. As well as the “hot” area in town………..location, location, location is one thing that has not changed…………..but this market research can change every 6 months in this market. So, I would buy a home that you know you can flip quickly. Make sure to document all upgrades as a lender will want to know why it is selling for more in such a short time.

After you have you have these numbers, you can calculate the purchase price plus renovation price…………this should give you a good idea, if you are making a good investment. However nothing is for sure…………make sure you can handle that mortgage if the home takes a while to sell!
0 votes
Tammy Stone, Agent, Grand Rapids, MI
Wed Nov 21, 2007
Jennifer... just remember that price, condition and location always come into play. With so many homes on the market, you need to see what you could possibly get for that house in the neighborhood that it's in, figure out the costs to rehab to see what your net result will be. There are tons of great deals around the area, if you can profit by $10-15,000.00, you are doing very well. Anything above that amount is gravy!
Another thing that I like to caution investors on is that you need to look at a home like a buyer would. There are certain characteristics that buyers will look for depending on the age of the home that tends to attract them. I work with a lot of 1st time home buyers and if you need any help or advice, call me anytime.
0 votes
Alicia Beyer, , Grand Rapids, MI
Tue Nov 13, 2007
I buy a lot of investment properties and have very good luck with HUD homes. You can buy them very reasonable and depending on your financing can even get funds to help fix the property up. I have found several in the last few weeks with high assessed values and needed very little work. Thats how you make money in invesment proeprties. Call me today and I would be happy to show you HUD homes in the area you want to invest in. Alicia Beyer - ERA NETWORK REAL ESTATE -616-893-2505
Web Reference:  HTTP://WWW.2905BONNELL.COM
0 votes
Ethan, , Grand Rapids, MI
Thu Oct 25, 2007
Jennifer, One of the keys is determining the finished value so that you know what you can put into the rehab. There are several great values in Grand Rapids
0 votes
Dana Clausen, , Grand Rapids, MI
Sat Aug 25, 2007
Good idea, Jennifer... but I would suggest upping the dollar range for purchasing. Solid neighborhoods that you will be pleased with for resale value, will forclose no less than $60,000... Your realtor can help you determine a great neighborhood by researching the lowest days on the market. Be ready to offer - the good ones sell quickly and will need to close within 30-45 days. I've got a few neighborhoods in mind that might be of interest to you.
Web Reference:  http://www.DanaSellsGR.com
0 votes
Steve Volkers, Agent, Grand Rapids, MI
Sun Jul 29, 2007
There are some good house in are market right now! I just went through one for $25,000 that could be sold for $50,000 with little work. There are some good lists to use to get your numbers right. Check out the book the The Millionaire Real Estate Investor. It’s a great book that walks you through all the basics of how to get started in investing in properties. Let me know if I can be of any more help.
0 votes
Missy Caulk, Agent, Saline, MI
Wed Jul 25, 2007
Use a local realtor to determine market value now and after it is fixed up. I agree Lola is the best. Her email is laudu@grar.com
0 votes
Maureen Fran…, Agent, Birmingham, MI
Tue Jul 24, 2007
I would contact Lola Audu at Audu Real Estate in Grand Rapids. I am sure she can give you good advice on the Grand Rapids market.
Web Reference:  http://mioaklandcounty.com
0 votes
Melissa Manc…, Agent, Plainville, MA
Tue Jul 24, 2007
Hi There,

Other costs you should incorporate into your calculations are capital gains taxes and realtors fees (when its time for you to sell) In Massachusetts, we have Tax Stamps which is an added cost of $4.56 per thousand of the sale price. Also, the carrying costs: Mortgage Payments, Taxes, Insurances, Utilities. As a general rule of thumb, I advise my investors to have a 20% buffer zone to absorb any unforeseen additional costs. Best of luck to you!!

Melissa Mancini, Realtor, CBR, GRI
Web Reference:  http://MelissaBMancini.com
0 votes
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