My latest finding among foreclosures in the area is a house listed for $12,000.
While it’s not uncommon for foreclosed homes in my area to go for extremely low amounts (decent homes in the $20k – $30k range) homes are usually quite a bit more than $12,000. But I did recently see a much nicer and larger house in a similar area go for $14,000.
My bet is that this home listed for $12k will sell somewhere around $8-$10k since it needs a complete overhaul and will require a cash buyer.
Pricing It Out
I thought it’d be fun to walk through and get a ball park estimate of how much money it’d take to make this home livable.
Here are some pictures for you:
This home is only 660 square foot, which is tiny in this area. It also means that fixing up the inside of the house will require a significantly lower amount of money than other houses I’ve looked at. It also means that the house will bring a bit less money and may be more appealing as a rental instead of a flip.
Now let’s price it out. What this house needs: (figures are estimates)
- New Roof – $5,000
- Around 8 Windows – $1,200
- New Bathroom – $500
- New Kitchen – $1,500
- Carpet – $1,500
- Paint – $200
- Gravel for Driveway – $250
Total = $10,150
I think some of my estimates are a bit high. This house is super small. I used a carpet calculator to figure the carpeting number but I am pretty confident I could have carpet installed for much, much less. Also the gravel is very much necessary. You currently cannot even see the driveway – it just looks like it’s all yard.
If we had to give the full price of $12,000, do repairs of $10,150, and to be safe add a $1,000 contingency budget, the total amount invested would be $23,150. And as far as selling it goes I don’t see it going over $30,000 fixed up.
The area is decent but not anything great. It’s located beside a Christian kindergarten center and on a semi-busy highway, although it is a good bit off the road. Had it been located a street over I think it could go for much more.
You’d also have to figure in property taxes at $410 per year and insurance at an estimated $500 per year. If we factor this in and forget about things like closing costs and realtor fees and the house were to sell at $30,000 there would only be a profit of $5,940. That’s BEFORE taxes which would eat up another huge portion of the profit.
So is it worth it to flip a $12,000 house? In my opinion, not this one.
There’s far too much work for a questionable profit and tons of problems could arise.
However, if rented it could be a whole different story. Assuming the total amount of money in the house is $23,150 this home could reasonably rent for $500 a month.
If we took 30 percent of the rent each month to account for expenses such as insurance, taxes, repairs, and months the property is vacant the net income would be $350 per month. It would take a little over five years to recoup the money invested and everything after that would be pure profit. Not too bad!
Would you have any interest in a house like this? Or do you think there’s just too much room for things to go bad?