I mentioned in my last post that we picked up another house — The Flood House.
First, here are some pictures…
The property is a 3 bedroom/2 bath house built in 2000. It’s 1400 square feet on a single story (slab foundation), and located in a very nice little neighborhood a bit further out than the rest of our houses. Houses in this subdivision were selling in the $140K range when they were built 10 years ago, and despite some ups and downs were still selling in that same range as of early last year, before much of the subdivision was flooded.
I wouldn’t be surprised if the values returned to $120-140K range within a few years, assuming there is no additional flooding and assuming FEMA doesn’t reclassify this area as a flood hazard (it wasn’t reclassified after last year’s flood). So, while we plan to rehab and resell this property quickly, if for some reason we need to hold it longer-term, I believe the value is still there.
Here are some basic numbers on this project:
- Purchase Price: $31,500
- Anticipated Resale Value: $90,000-105,000K
- Rehab Budget Goal: $34,500
The reason for the budget goal of $34,500 is that this is the budget we’ll need to hit to make our minimum profit of $15K if we sell at the low end of our expected sale range. In other words, if we rehab for $34,500 and sell for $90,000, we’ll make about $15K in profit. The resale range is large because no houses have sold for retail prices since the flood; in fact, we’re not even tremendously confident with the $90K number. In theory, it’s possible we won’t be able to find a buyer at all this soon after the flooding, but we (and other investors who are buying up the houses in this subdivision) are taking that chance.
If we can’t sell for at least $90K (to make our minimum profit target), or if we overrun the budget, we’ll consider other exit strategies, such as rent or lease-purchase. Additionally, we have a 10-day inspection contingency that runs through the end of this month; if we start getting contractor bids that are much higher than what we expect, we can try to renegotiate the purchase price or back out of the deal.
As you’ll see in tomorrow’s post (where I’ll lay out the preliminary budget in gory detail), there are a lot of rehab and budget risks with this project…