Remodels in Today’s Market!
Hey I thought I’d run this idea by you because I think its great…
There are a bunch of homes in areas in Salt Lake County (Magna, Rose Park, Kearns, West side Salt Lake, etc) that have a great potential for remodels. The reason they have great potential is because the homes are pretty trashed and the everyday buyer in that price range does not have the cash to fix it up, and more importantly they can’t get a loan because a bank isn’t going to loan on a house in this condition. Well, some of these homes get their value hit so hard they are selling for anywhere from $50K-$100K as bank repos. However if you go in and do a quick cosmetic uplift, maybe a new vinyl exterior depending on condition, new carpet, new paint, nice cabinets (but still cheaper ones), you can turn around and sell these things for a nice profit because buyers will pay up to $150K for a home in decent condition.
I have been showing a client these places and he is going to submit a couple offers on bank repos next week and do the work himself and turn around and sell it and make anywhere from $20K-$40K depending on the deal with a 6-8 month time frame, and it usually works out to be a great return on his money. The one he has his eye on will actually be around an 18% return. The deals I have been looking at with him have all been less than $70K and need around $20K of work. In a nutshell, he is into the home TOTAL around $90,000. Then he can turn around and sell it for anywhere from $120K to $140K depending on sq footage, # of bedrooms and baths, area, etc.
Attached is sheet I made of a guy who did this all last year. He successfully did over 5 of these in the worst market most of us will ever see. I know of a few other guys who are jumping on board as well.
Here’s the advantages I see to a deal like this:
1) Not very expensive. You won’t extend yourself too much.
2) Lots of buyers. Surprisingly Rose Park and areas on the west side of Salt Lake (900 W to 1700 W) have been selling quickly and had good turnover. It’s not like trying to sell a million dollar east side home that don’t move quickly and stay on the market for a long time.
3) Return on money. I have looked at a lot of remodels this year and even for the guys who pick up a home in a better east side location usually will max out at $40K profit, but yet they need to pay upwards of $150-$220K just to get the house, and THEN they have to remodel it. The more expensive homes don’t necessarily mean better return on $$, in fact sometimes it is worse.
4) Worst Case scenario. I always like to look at deals with a worst case scenario in mind. Meaning, if for some reason you said, “Crap, I HAVE to sell this in a weekend!” We could put it up for around $109,000 or even $105,000 and you’d still make a little money and it would sell. Think about it from a buyer’s perspective. The only thing even decently nice under $120k in ALL of Salt Lake are condos and many are only one or two bedroom, so if you are advertising a 3 bed, 2 bath 1,400 sq foot home you will be able to sell it. These homes are out there.
5) Short time frames and turn around time. These remodels are quick and don’t need to be anything fancy or over the top. As long as it is nice and all the systems in the home are working, low income families will look at it and like it. You really could do most work within two months from what I’ve seen, and in some cases one month if you are working fast.
Sorry this got so long, I just think its one of the only things that makes sense in today’s housing environment as far a flips and remodels go. These deals really are selling quickly and more investors are jumping on board. I sent my client three new listings last week and all three are under contract now.
Let me know what you think!
-Brad
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