First and foremost, I hope everyone had a wonderful July 4th weekend. It is our Independence Day.
Continuing on with our Rehab Process, you have just gone over all the things necessary to Rehab a home you may want to buy. You reviewed these Fixes with your general contractor and now you “think” you have a good idea of what should take place to get this home into shape. Remember this could be a Rehab to Flip or a Rehab that you plan to stay in for a long time (different fixes/costs apply).
The next Step is to simply make the Offer. Discuss with your Realtor® what you are thinking and how you got to your Price you want to offer. Your Realtor®, should be able to help you understand what the houses in the area are worth and confirm (or not) your price as to being a good offer. Either way, your Realtor® is required to Present All Offers for you.
So here is an example of the basics on how to get a number that works for you. Let’s say the seller wants $275,000 for their home. Your Realtor®, shows you Sold properties in the area that are similar in price and size and gets you a basic Price/SqFt number. Let’s say the house is 1500 SqFt (roughly $183.33/sqft). The other homes have updates done though (so you may want to offer $160-$175/sqft). You get your Fixes/Updates on a list and got some numbers from your contractor, and that shows around $35,000 to get things fixed up. If you put that into the home then you would have $310,000 into this home.
You now have to ask yourself (and your Realtor®) if this home would ever be worth that amount.? Is the neighborhood in a hot area or is it basically flat (showing little to no appreciation)..? Your options are to:
The bottom line is you need to Stick to Your Plan. If you said you were not going to spend more than $X and/or you were only going to buy if you could rehab for $X where you can see instant equity, then do it. Don’t let your emotions take over. I know that is easier said than done.!
Ok….next week let’s continue on with some Offers and see if this place is Bought.