I found a 1 BD 1 BA house listed for 150K that seems to be in overall good condition, esp for a foreclosure, but the people that were updating it made some poor choices with renovations and contractors, and it is partially completed. There is a recent inspection that states part of the roof and joists need to be replaced (The roof collapsed in 2014, and was supposedly repaired.) The estimate was 7K. The house price is 150K, and tax assessment value is 270K. I'm open to spending up to 25K on renovations to get it solid, and am considering cashing out my investments (half of my assets) to do a cash sale. Oh, and I currently do not have income, so have been living on the assets.
Should I do this? (Am I crazy?)
byu/truthforallreddit inrealestateinvesting
Posted by truthforallreddit
3 Comments
Sounds like you saying that you could buy and renovate the house for something like $200,000. And then you it for $270,000. Maybe your transaction costs are 5% of the sale, so that means you would net around 50 or $60,000. Is that worth it to you, for the amount of time you would have to invest? It really is a question that only you can answer. Should you cash out your other investments? That’s a question for you, really. So here’s what you do: write down every conceivable cost and every kind of profit if you do the project. include your own rent if it would need to change, taxes, insurance, etc. And then write down where you would be in three months or whatever if you don’t do the project: include things like the money you would receive if you left your money in these other investments, taxes, maybe the gain you would get if you work at some other job if that is possible. I think it will help you to have it all written down and sitting in front of you. There is no secret sauce here, you just need to be able to have your options laid out clearly and then make your choice.
Do you feel comfortable being able to complete all the work under $25k? It is a gamble, cashing out half your assets to be able to complete this deal with no income sounds very risky. Have you worked on fix and flips before?
No don’t do it. 1/1 are not super desirable and you don’t really know the entire scope of work needed until you open up the walls and flooring. There’s a reason whomever the current owner is wants out and never finished the rehab. If there was money to be made in the deal they would have found a way to finish the project. Don’t believe what they’re telling you and do your own due diligence. When you go back to work sure…do a flip…but find a 2/1 for your first flip…not a 1/1.