OfflineHi all,
I have another of my stupid questions. (according to my grandmother though, the only stupid question is a question one already knows the answer to.) So I guess this does not qualify as stupid.
We have come across what on the surface appears to be a very sweet deal, from a wholesalers perspective at least. It is a very large 3 story located in a fairly prominent historical district. I know one should try to find out as much as possible before jumping into something like this so I am here to ask for some insight.
From a wholesalers perspective, there doesn’t seem to be much in the way. (feeling the ground getting soft about to give way?) Where I am afraid there might be issues is from the buyers perspective. Not sure where one goes about looking for a buyer who would take something like this on, or if I should even try.
The property we are looking at will come with most likely a whopping 100k or more rehab attached to it, but in the end should sell for .5 to .6 mil. Not that it is in bad shape, but the comps for the area are getting the way way over the top type rehabs, those that you see on TV getting the 30k counter tops and 10k designer commodes
I have never seen one done, nor do I know much about all the red tape that must be attached to such a property. Is this why,to me any way, the property seems to be undervalued? What are the risks involved and who are they most directed at.
What do I need to look for other than the obvious condition of the property that would be big red flags. Has anyone done any Historical area wholesale deals, or done any buy/rehab/flip deals in such a place? Anyone having done such a project or having insight into historical area rehab, please chime in. Its huge, but it meets most of the Dean and Mat criteria so it must be a doable deal.
Thanks
Bryon
p.s. I don’t have any cute sayings yet, except maybe “My head hurts, but I’m doing it any way”
I haven't done any deals myself in a historical area, but in talking to my contractor I understand that the permits involved in the fix-up can be a real pain in the you-know-what.
You might try to research the type of restrictions that there will be in that area. Also, if it's historical, the building may be quite old and might have some of that old lead paint....stuff like that.
If it needs a huge budget for rehab, it just might be waiting for the right person and that's all. It's hard to tell.
Although I myself have not done a rehab, I'm familiar with a contractor who has. When he bought a flip in a historical area, his buying contract did not say anything about rehabbing the house to fit the requirements for the historical area. Obviously the contractor did what he wanted and this did not sell well with the preservation people. The contractor said that the sales contract did not stipulate anything about the historical requirements so he did what he wanted.
I see this as a rare example.
I recommend that you take your list of repairs to the inspector/ preservation people and see if anything on that list would have any special requirements that are on their list. If it's not done right, it might postpone the sale.
example:
I replace the front door with a steel door. Cost $250 (rough price). Old houses may have doors that are a different standard size than today's standards. I go to sell the place, then find out that I have to have a custom made wood door to the old size to satisfy the preservation people. That wood door could easily cost over $1k. Not allowed to sell the place until the wood door is installed.
You want to give your buyer as much accurate information as you can.
The more thorough the question, the more thorough the answer.
Please fill out your profile with as much info as you're comfortable with.
Thanks.
You are going to wholesale right? Don't sweat the details. Your rehabber buyer will know what to do. What you have to do is get the property at a price that you can wholesale it to your buyer and make some money. You don't have to know the costs down to the penny as far as rehab, permits etc.
You say a very nicely remodeled property will go for $600,000. You also say that the remodel will run $100,000.
Your buyer sells it for $600,000. He will have around $60,000 in commissions, closing costs, insurance, taxes, utilities etc. He will spend $100,000 on rehab. You want to make, lets say $15,000.. I am sure on a deal like this your buyer will want to net $60,000. SO you need to get the place under contract for
$365,000 or less.
This is ALL you need to know to wholesale.
1. Your ARV is accurate.
2. The remodel/rehab design and cost will bring your ARV. What is the rehab cost.
Done! You have the numbers you need to make the offer. Get it under contract and try to move it within your inspection period. No buyer? Give it back before the inspection period ends. SIMPLE.
Good Luck!
Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
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