Is It Worth The Investment?

kchr

Hi,

First, Hello to everyone and Happy New Year! I am new to this site but I do generally know what goes on. LoL! I need to know if a home in a suburb of PA (middle class neighborhood) a certain 3 story, 65+ years old stone (1st floor), twin house is worth abouth 90-115K in pretty fair condition with minor problems. However; this particular house has about 8-10 years of neglect (i.e. needs new plumbing, 2 bathrooms, 2 kitchens, heating throughout, driveway side of building from the first floor to the top of the second floor, new roof, what use to be a kitchen addition/bathroom on the first floor is gone and the front porch needs to be replaced. Now, I've estimated that it will require approx. 25-35K to totally rehab the place with out gutting. The owner wants 45K. Is it worth the investment?

Thanks

KCHR from PA

mdshunk

There's no possible way to answer that. Transplant my home 3 miles over as the crow flies in a development, and it's worth 100K more. Your best bet might be to get a local realtor involved. Tell them that you intend to list it with them when you get done with the rehab, and you want a ballpark market value (not an appraisal). This is a common request of them. Only relators and appraisers know your local market.

kchr

Thanks, I forgot to mention that I was thinking about making it into a duplex. Would that be a worthwhile investment in the long run.

Pearce Services

If you can do all that work for 25-35K I would be impressed.
If you are doing the work yourself, are you figuring into the estimate a fair profit for your time, or is that just your actual cost? Do not forget opportunity costs for income you could have made doing something else with your time.

You need to add to your final cost estimates a contingency amount for unforeseen work that will be required, along with $5000 or more for bank interest while you are remodeling.

It's been a while since I've been to that area, Spent some time in Pottstown, What I recall is that the houses sat on the market for quite a long time before they would sell. If you are re-selling, that is a consideration.

If you are renting, you need to figure out what the market is for rentals, and also add more money to your cost estimates. If renting I would spend more money for better components in the kitchen and bath so you are not replacing things after every tenant.

jmic

Keep in mind if you get tenants who have no respect for your property, wether you have good appliances/ fixtures or lower end stuff, they'll still trash it
Joe

Pearce Services

Joe, You may be right,

But if he's converting this place to Duplexes, His rent should be higher than a typical apartment. With a security deposit, and a good screening process, he should be able to find tenants with a bit of pride. Even good tenants can damage cheap cabinets and flooring.

My intent is that if he is looking at the feasibility of the project, that he looks at price if he is flipping, and value if he is renting.

jmic

Pearce,
It all boils down to what his end dicision will be for what to do with the property. Occupy/rent, rent/rent, sell? We're both right!
Joe

bob the builder

Where I live you can go online to the cities site, then go to the assessors office page and check out recent sales or assessed values on that street you want to purchase on. It also tells you last purchase price and info about the house you want to purchase. If your living in a small town doubtful that you can do that though. I also go onto local newpaper site and do the same searches.

Bob

Eric K

kchr ,

Where about in PA are you talking about

kchr

Kbkconstruction

The house is in delaware county, pa. The homes roughly go between 90k-175k. I figure if I invest about 50k at the most I should make a profit between 25k-40k.

logical

You might...none of us has any way of knowing without being involved in the local real estate game in your area. The key is to understand what the place will sell relatively quickly for when you are done.

If you are new in the game of flipping houses, understand that "profit" you expect has to also cover:

- cost over-runs due to suprises
- capital gains on the "profit" (or if you do this for a living it may even be taxed as ordinary income)
- interest/closing costs
- real estate commissions/fees if you use a realtor

I think you need to do some homework. As this thread went on you went from a 25-35 k cost to 50k. If the place costs 45, you invest 50 and it is only worth the low end of your 90-115 estimate.......well, you can do the math.

It ain't always the way it is on HGTV.

Pearce Services

Joe,

I just looked at a three family that need to be rehabbed for one of my customers........

I think I now agree with your point on going cheap.....The 3 units were all trashed. I know the previous owners of this property, and it was in very nice shape only a few years ago. Where is the pride in this world.

LNG24

Wonder what ever happend with him on this. No follow up?? All I can say is that if you are asking here, I think you need to do more research. I don't see this a a forum for assessing fixer uppers. You need to have a Realtor, Contractor, Lawyer and Accountant. Doing Fixer uppers or Flipping properties is a business and thus you need a business plan. What we say here should not be a deciding factor in your decission to purchase or walk away. Start with a SMART Realtor who knows investing and has done several him/herself. FYI: I am a Realtor, Contractor and Property Manager and I do this kind of work for a living. I can speak from experience that if you do not have your team in place prior to starting this type of business you will, at best Break Even. Remember that most Real Estate agents are working for the seller. Buyers Agents are working for you, but want you to buy! You need to find someone you can trust to get honest advice from. If you want to see if your Realtor knows what he/she is talking about, ask them how many 1031 Exchange deals they have handled. Most or at least too many, don't even know what that is. Any Realtor that works with a Real Estate investor (which is what you are trying to do) should know this inside and out! If they never heard of it...RUN