Well, I put in an offer today for the house on Polk Street (by the way, my Realtor said she loves the new website at www.FlipThatHouseWebsite.com). Polk Street is the other Riverside house I mentioned yesterday. But that’s putting the punch line first. Let me go back…
I mentioned yesterday about another house in Riverside that I saw and think it might be a good candidate for me to Flip That House, but it definitely needs work. I put together an estimate of what I think the costs would be on the property to get it back in first class condition. Given the fact that I figure it needs to be taken down to the studs, completely insulated, a lot of new wiring, new drywall, doors, hardware, baseboard, new cabinets throughout, new plaster in the swimming pool and new pool equipment, complete landscaping, everything; I came up with a rehab cost of $104,000.
Now, I have also computed the After Repair Value (ARV) to be about $325,000 based on comps in the area. Using the 70% rule, that means I can get a loan of around $225,000. Subtract from that the rehab costs it leaves $121,000. Subtract from that a 10% fudge factor on the rehab and it leaves about $111,000. That represents my purchase price.
I made an offer of $105,000 all cash closing in 15 days. I went to $105K to allow me room to come back with a higher counter offer when they counter me (assuming me the will). In fact they are probably going to laugh considering they have it listed for $275K. I’m probably going to have to educate them on just what a liability they have sitting there.
I remember a mentor of mine told me one time that “if you’re not embarresed by the offer, you are offering too much.” Actually, it is a little embarrasing especially knowing that they (the bank) are not going to just jump at the offer, but this thing has been sitting there for over a year and it really is in bad shape. They just may not know it. I will make that they do know before this is over.
I’ll let you know you know what happens.
