Nov
21
Make Your Money When You Buy
Posted by Brad Boisvert under For Buyers, Regional News, New Hampshire
Here’s why you make your money when you buy real estate, not when you sell. Apply this strategy and watch the market work for you.
In our office, my team is always examining ways to build equity on home purchases and running “the numbers” on local Seacoast, NH properties is a daily exercise. An excellent example of this is 90 Burkitt St, Portsmouth NH, MLS # 2684047. It is our opinion this property is a classic fixer upper, seems solid, nice yard, and garage. It is a 1300 square foot New Englander with 3 smaller sized bedrooms and 1.5 baths, walking distance to town, asking price $259,900. This property is located in one of the few neighborhoods in Portsmouth which has actually experienced an increase in average selling prices in 2007.
It is our opinion you have at least two ways to look at this property from an equity building point of view.
Option # 1. The full gut— A complete renovation with a small rear addition and bringing the house down to the studs. There would be minor changes in floor plan to increase the bedroom sizes and everyday living space. It factors in all new electric and plumbing system, including adding a master bedroom with bath and changing from 1.5 to 2.5 baths. When completed the house would be 1600 square feet and worth +/- $365,000 in today’s market. If you are interested in an opportunity in this market you simply run you numbers in reverse:
+ $365,000 today’s value after completion
- $125,000 less cost of construction
- $36,500 less desired equity
- 10%= $203,500 purchase price
Note: Feel free to change desired equity!!
Option # 2 The simple face lift. This would consist of renovating the kitchen and current 1.5 baths. You would not go outside the structure or change the floor plan in any dramatic way. The floors would be refinished or new hardwood floors would be installed as necessary, paneling removed and house painted inside, as well as light electrical and plumbing upgrades. The cost should be in the neighborhood of $50,000. By our estimates when complete the 1300 square ft Burkitt St house would be worth +/-$285,000. In applying the above strategies $285,000-$50,000-$28,500 = $206,500. You wouldn’t want to purchase the property for any more than $206,500.
Based on this exercise it is my opinion that this property should be purchased for no more than $205,000. If you are an investor you would want to purchase it for considerably less based upon your desired profit. Would they accept an offer like this???? Only one way to find out……Further due diligence is required before pursuing any offer, however if you complete this exercise prior to seeing the property it will help you know what to look for when you preview the home.
Comment (1)