brand new! situation question

[byfaith]

Very new here. we have been reading, studying all we can aboud REI over the past 2 years, i have expereince in mortgage business (i have been a mortgage broker for 5 years) , before that I was a realtor and i earned a living as a handyman as a young teenager. now I am looking to renovate my first home.  I have not made the offer yet, so i want to get your advice. homes here are selling (new) at $120-$125 per sq foot.  This home is 2700 sq feet. 1350 upstairs and 1350 down, all brick.....about 35 years old!! it needs lots of updates as in paint, fixtures, etc....it is on 5 acres and has a view of the mountains which is worth something in this area. the land is level but not cleared off. asking price $279000.00 what do you think? just looking for whatever advice you can give me heere. thanks!

[mbrown1911]

Hope you are doing well…Your question is somewhat broad. The decision to purchase the home would depend on your goal or exit strategy (retail, rental, wholesale, primary residence, etc.). Typically investors by at 65-75% of the FMV unless buying in a high appreciating area. Sounds like you are around 86% given the worst case scenario. $120 per sq foot X 2700 sq feet = $324,000. $279,000.00 (asking price) / $324,000 (FMV) = 86%.

In addition, you need a more detailed repair list along with costs. Based on the information given the repairs aren’t major and won’t be as significant since you have past experience. Remember that expenses such as closing costs, inspection, appraisal, realtor fees, etc will have an affect on your equity & profit margin. My suggestion is to submit a lower offer…doesn’t have to be an offending low ball offer…Maybe around $240,00.00 to start negotiations.

In my opinion, the home is not a candidate for a wholesale or flip. However, lease option is a great strategy for homeowners desiring to receive FMV for homes. There are other circumstances surrounding your deal which an outsider would be unaware. I assume that it’s a high demand area because of the mountain view. If you really feel good about the home I would seek to fix it into tip top shape and then lease option or retail the home at full value.