Ask Cornerstone: I inherited a house that is a total disaster but with huge potential. Should I sell it as is or try to make the most of this opportunity?
I have just inherited a house. It's a total disaster and although I haven't had it appraised yet, I'm assuming I will not get much when I try to sell it. It was built in 1993, the driveway needs to be replaced, there's a sink hole in the back yard, the landscaping is horrendous and the interior has leaks, visible mold and nothing is salvageable. What I really want to do is gut it, remodel and sell it for the highest profit available.
The houses in this area are selling in the 270,000 to 310,000 range. I really don't know where to start since I am a stay at home mother with no monthly income so I'm assuming I couldn't get a loan. I've heard of home equity loans and construction loans but I'm not sure which one would be best for my situation if any or if I should look for a private investor.
Do you think it's best to sell it as is and use those profits for future investments or try to somehow make the most of this opportunity? Any advice would be greatly appreciated.
To come out of your situation with the most revenue, do some research so you'll be armed with good data and information.
First, I would put a lock box on the property so that you can let people in for inspections/estimating without somebody having to be there.
Second, I would establish “as-is” value and “After Repair Value” (ARV) by asking 4 or 5 real estate agents to give you both numbers.
Third, I would use “THEBLUEBOOK.COM” and get 4 to 5 suitable contractors to give you complete renovation bids.
Fourth, I would go to local Real Estate Investment Clubs and talk to flippers. You can find them on internet by searching REI Club (your metropolitan city). Many of them would be more than happy to provide repair funds and then split the profit with you. Again, you would have to talk to 4 or 5 flippers and they would do their own estimate and tell you what they are willing to do and how the profit would be split.
Fifth, after you get all the proposals from the flippers than you call back all the contractors that gave a bid and ask them if they would be open to doing renovation with their funds and getting a portion of the profit on top of their bid. When the house is sold, first all the sale costs are deducted, then as-is value is deducted, then repair cost is deducted and what is left is the profit.
Finally, how the profit is split depends on negotiation and on how extensive the renovation was. It has to be win-win situation and the hardest thing will be to know when the people are trying to take advantage of you. That is why I suggested educating yourself and hopefully you come out with enough money to do this again and start having an income. You have an unbelievable opportunity make best out of it.
Also I would immediately start going to local investment clubs and really get to know investors and flippers. Remember you have valuable property! Almost anything that was built in nineties and has ARV of $270K is worth fixing.