| The comparable sales in a one-mile area
| |
| | coming up with problems that needed more
|
| around the property will be the ones you
| |
| | money to handle. The reality was that the
|
| want to be looking at. This is a general
| |
| | contractor had actually returned for a
|
| rule. There are many areas where you have
| |
| | refund all the supplies or sold them and
|
| do comparable sales block-by-block, or
| |
| | took off to parts unknown after going
|
| street-by-street. A comparable sale would
| |
| | through all the allotted money my
|
| be a similar property that has sold in
| |
| | investor had supplied for the rehab.
|
| the last six months compared to the one
| |
| | Or this one---my partner researched the
|
| you are buying. For example, if you were
| |
| | property at the city but "Oops, I don't
|
| going to buy a 1000 square foot, 3
| |
| | know why the condemnation notice wasn't
|
| bedroom house, brick, with attached 2 car
| |
| | in the file but it is condemned and now
|
| garage, and full basement, you would want
| |
| | requires a city team inspection which
|
| to look for similar properties in that
| |
| | quadruples the cost. In addition, we are
|
| one mile radius or closer, in some cases.
| |
| | now on our third contractor-each of which
|
| If you are looking at a house that
| |
| | requires money up front to get started.
|
| differs in size, square footage, bedrooms
| |
| | Or, you are almost done with the rehab
|
| you will need to make adjustment in
| |
| | and someone breaks in and steals all the
|
| pricing to have a comparable to the
| |
| | Kitchen cabinets, the furnace, or all the
|
| target property. For example if the
| |
| | siding off the house. At one point in my
|
| target property has a 3 bedroom house
| |
| | life I found out that rival contractors
|
| with basement, and you are using a
| |
| | that I hired were breaking into each
|
| comparable 3 bedroom house with no
| |
| | other's jobs and stealing everything.
|
| basement, you might have put a downward
| |
| | (Not a good idea to have them all meeting
|
| adjustment factor of $10,000 to
| |
| | on one day of the week to collect their
|
| compensate for the missing basement in
| |
| | checks-it gives them opportunities to
|
| order to get a real value of the
| |
| | know their rival's business.)
|
| comparable sale. You need to look at the
| |
| | Or, oops, I am sorry the city water
|
| amount of time the house was on the
| |
| | department read the wrong meter reading
|
| market (the number of days it took to
| |
| | and you house is the one that had water
|
| sell the house). You don't want to be
| |
| | flowing for a year because of squatters
|
| basing your buy on a house that was on
| |
| | and you owe $3,000.00.
|
| the market for long periods of time. If
| |
| | Oops, that wall in the basement that just
|
| you use comparable sales that all took 10
| |
| | needs to be straightened out and
|
| months to sell and you are looking to buy
| |
| | supported is actually crumbling from a
|
| the house, fix it up and sell it in 3
| |
| | chronic water problem and you will have
|
| months, you sure don't want to use these
| |
| | to dig a new basement. What if, half way
|
| houses as "comps" that took 10 months to
| |
| | through the rehab you find out you have a
|
| sell. So we now know how to determine
| |
| | problem that requires you to "quiet the
|
| what the house we are looking at would
| |
| | title" to make it clean and sellable?e.
|
| sell for.
| |
| | Don't forget you might have mortgage
|
| I am going to suggest that if you are
| |
| | costs for the buy and sell. You will also
|
| getting into this business to be a
| |
| | have other closing cost like commissions
|
| landlord that you treat your rental
| |
| | to realtors, title insurance, title fees
|
| business as if it were the business of
| |
| | and recording fees. All these need to be
|
| finding, fixing, and reselling. I say
| |
| | figured in your cost on the buy.f. Don't
|
| this because most landlords will be
| |
| | fool your self into thinking you will be
|
| selling at some point in time. So don't
| |
| | able to buy fix and sell a house in 6
|
| just look at buying houses based on cash
| |
| | months. Base your buy on cost over runs!
|
| flow, or tax benefits. You need to look
| |
| | If you do bring your project in on budget
|
| at it from the point of view that if you
| |
| | then you are going to be smiling.
|
| were to get sick tomorrow could you
| |
| | OUR EXAMPLE OF SETTING MINIMUM BUY PRICE:
|
| resell the property at a profit.
| |
| | $60,000.00
|
| Let's talk about profit, after all this
| |
| | Real estate commissions based 6%
|
| is a business and that is what you are
| |
| | (3,600.00)closing cost seller pay 6%
|
| after. So what is the profit you want to
| |
| | allowable closingsubject to appraisal
|
| make in this business? That's right;
| |
| | (after repaired value)project profit
|
| profit is where you want to start! Let's
| |
| | (12,000.00)cost for buyer, (title
|
| assume that I am looking at houses that
| |
| | insurance, recording fees etc) (
|
| sell in 3-month period for $60,000. Let's
| |
| | 4,800.00)
|
| say we are looking at a house that needs
| |
| | Cost of mortgage on buy (appraisal,
|
| a new kitchen, paint and carpet. If all
| |
| | mortgage cost) (4,600.00)use 12 months
|
| those repairs were done, the house would
| |
| | (taxes, gas, electric, grass, mortgage
|
| sell most likely for $60,000.00 in three
| |
| | payments) ( 9,600.00)
|
| months based on comparable sales. So
| |
| | Rehabilitation cost - est. $7,000.00
|
| another way to say this would be that the
| |
| | (Double cost) (14,000.00)price you
|
| after repair value of the home would be
| |
| | purchase property for: (11,400.00)
|
| $60,000.00. Some nonconforming lenders
| |
| | 60,000.00
|
| and HUD 203-k mortgages use what is
| |
| | This may appear as extreme example of
|
| called a "subject to appraisal" (which is
| |
| | cost over runs. I have doubled your cost
|
| another way of saying the after repair
| |
| | and assumed that you had a realtor sell
|
| market price). So we have a minimum
| |
| | the house. I am clear as a person who has
|
| profit goal for this $60,000.00 after
| |
| | seen a lot of people come and go in this
|
| market value home of $12,000.00.
| |
| | business, you need to figure your cost
|
| So we now build the model to determine
| |
| | high and you need to be able to do your
|
| what the maximum $ we want to pay for the
| |
| | own comps (comparable sales) I recommend
|
| house we found are. You now have to start
| |
| | that people get real estate license. Why?
|
| adding in your cost? The costs you need
| |
| | Because the advantage is that it will
|
| to add up are as follows:a. Your time -
| |
| | give you access to MLS (listing service),
|
| What is your time worth? How much time
| |
| | which will give access to sales reported
|
| are you personally going to be spending
| |
| | to the MLS. More importantly, it will
|
| on the buy, rehab and etc? Put a dollar
| |
| | train you to be a knowledgeable buyer and
|
| figure to your time.b. How much is the
| |
| | know first hand what is required to have
|
| rehab going to cost? I have seen a lot of
| |
| | your real estate transactions comply with
|
| people in this business that are very
| |
| | federal, state, and municipal
|
| experienced. The majority of them will
| |
| | restrictions. Plus, you will learn what
|
| tell you that their rehabilitation cost
| |
| | is necessary to have the transaction be
|
| will run 1 ½ more than they expected or
| |
| | complete and within integrity guidelines.
|
| estimated. It's a must to build in cost
| |
| | In addition, you will be putting you
|
| over runs. If you are a new investor take
| |
| | license with a broker who will be there
|
| your estimated cost and double them for
| |
| | to train you while doing your beginning
|
| figuring your rehab.c. What is cost of
| |
| | deals. It requires 40 hours of classroom
|
| your holding time? You need to look at
| |
| | on Michigan real estate, plus passing a
|
| how long you think it will take you to
| |
| | test to get your license---even if you
|
| rehab the property. If you think it will
| |
| | don't end up getting your license. The
|
| take you 3 months to fix the property up
| |
| | knowledge you get in these training
|
| - double the time to 6 months when doing
| |
| | courses is invaluable.
|
| the financial analysis. If comparable
| |
| | I prefer to work with licensed investors,
|
| sales show 3-month selling time - double
| |
| | especially with challenged properties,
|
| that time and cost. So if your property
| |
| | because it assures me that the person you
|
| insurance, lights, gas, gas cutting,
| |
| | are working with has at least a basic
|
| house cleaning, alarm system, mortgage
| |
| | level of knowledge of Real Estate. The
|
| payment are running you $800 month you
| |
| | more knowledgeable a person is, the more
|
| need to take that cost times 12 months
| |
| | likely they are to achieve their goal. In
|
| since we have double our 3 month
| |
| | fact some of the investors that have
|
| rehabilitation time, and double our 3
| |
| | worked with me generally end up getting
|
| month expected selling time.d. What kind
| |
| | their license and sometimes even become
|
| of reserves for breakdowns have you
| |
| | licensed under the same broker I am.
|
| figured in? I once had a partner in the
| |
| | There are many reputable real estate
|
| rehab of a house where he put up the
| |
| | schools.
|
| money for rehab up as his contribution. I
| |
| | If you are not a realtor and you are
|
| chose a contractor (this one actually had
| |
| | looking for comparables, you can go on to
|
| been with me for awhile and did good
| |
| | your Internet server and look under real
|
| work) and purchased the supplies. The
| |
| | estate, there will be comparable sell
|
| contractor kept giving me updates but
| |
| | section you can use.
|
