Acquisition – 422 S. Gaston St
Estimated ARV – $149,000
Rehab Cost – $45,000
List Price – $89,000
At first glance, this might not seem like a deal to most people. After Realtor fees and unforeseen expenses, this property could LOSE money. That’s what most people would see, unless you realize “list price” isn’t the price you offer or pay. Of course, “rehab cost” will usually miss at least a few items you weren’t expecting.
My first offer was $39,000 and the property went under contract for $44,000. Just because the asking price was nearly $90K, doesn’t mean anything. The offer price must be what YOU can afford to pay. It has nothing to do with value or asking price.
Actual rehab costs, including buying an enclosed trailer and a few new tools, were a little more than $55,000. After purchase, rehab, and holding cost, the property cost $105,000. With 6% Realtor fees and closing costs, the estimated ARV of $149,000 would leave $33,500 profit.
This wouldn’t be a bad deal and provides an ROI of 31.9%.
We did better…
The actual sale price of the house was $169,900 with sellers paying $5000 in closing costs. The check was more than $152,000. Thats a profit of $47,000 and ROI of 45%.
The house was on the market three days when the full price offer was received.
Any deal where you walk away with nearly $50K profit can’t be a bad one.
Remember… list price has nothing to do with the house value.
Remember… you offer what the house is worth TO YOU.
Remember… don’t let the list price determine the price you offer.