House in La Mesa, CA

An old friend of mine gave me information about a property in La Mesa, CA that may be available for sale.  Apparently, the person who owned it passed away and it was up to the heirs to either keep or sell it.  I had the opportunity to meet with one of the executors of the estate (Son).  Here’s the info on the deal:

Single Family Residence; 3 bedroom, 2 bath; built in 1960; 1760 sq.ft.; pool; 2-car garage. Free and Clear.

Asking: $450,000
Estimated ARV: $580,000

Sounds like a good deal?

My business partner and I estimated the cost of repairs.

There is the cost for demolition…it was in bad shape. The removal of kitchen appliances, cabinetry, countertops, sinks; bathroom sinks, tubs, shower, vanities, hardware, etc.; the removal of carpets and floors from 3 bedrooms, 2 baths, kitchen, living room, family room, etc. (Estimated $2,000 -$4,000)

The cost to repair or update systems (i.e. electrical, plumbing, HVAC, etc.) [$5,000]

The cost for new hardware, appliances, equipment, floors, paint, windows, doors, etc. [$20,000- $25,000]

And, that’s just the inside…..

Landscaping – removal of plants and junk in the yard, trimming of trees and bushes to be kept.
Pool – repairs to the pool and the water pump system, removal of old equipment
Aluminum patio cover – removal
Shed – removal
Roof & Soffits – repair of soffits
Fencing – repair
Hardscape – repair on cracks or replace cement
Repaint house
Replace garage door

We estimated another $25,000 to $30,000 for removal, replace or repair on exterior stuff. Total estimate so far is approximately $65,000 just on repairs.

Closing costs estimate includes Realtor commissions (6%), title & escrow fees and peripheral fees – $43,000

What about our profit? $40,000 minimum

So a total of $148,000 or $150,000 (rounded) needed to fix this place up.

$580,000 – estimated ARV
– $150,000 – costs to repair
=$430,000 – offer

Oh…I forgot to mention holding costs for 6 months…maybe another $10,000? So, $420,000 offer

Here’s what we offered:

Option 1 – $350,000 all cash at closing, close in 7 days

Option 2 – $425,000; Seller finances 100% for five years for 5 years @6%, no payment due for the next 90 days.  After rehab and sale of property, we will pay seller 10% above sale price of $550,000.

Somebody else got the property.  No worries…we keep on looking for properties and make offers.

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~ by Llew Quinol on March 18, 2016.

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