Visualizing a Home’s Potential
Ok, so there is this home in North Austin in the Meadows of Brushy Creek that turned out to be a foreclosure and is on the market. The home is 2929 ft2 and has a humongous backyard able and capable for a pool-in other words a perfect family house. It is also in a cul-de-sac and backs up to a street that has traffic, but is only traffic with a purpose-who ever travels the street does so to get to their own home. I showed the property a couple of times and as in most cases with foreclosures, the home is not in pristine condition. I take my time and point out each issue whether large or small so the entire picture is recognized. Each time I have shown the property, each client says “I like the floor plan, but it needs work.”
Yeah I agree, but if one could see the big picture such as it is in a desirable neighborhood, in Round Rock I.S.D., it has the master down/great floor plan/game room, and most of the work needed is cosmetic, a deal is sitting awaiting a buyer. If you do place an offer on this particular house and it is accepted, there is a 10 day option period, where you could back out if a major defect is found, because of course it is an as-is deal because it is a foreclosure and no requested repairs would be done.
Paint and carpet could make a huge difference for immediate move in where the rest of the mini projects could be done one project at a time, over time. The major one is carpet, but in many cases if the buyer does not have the liquid cash to buy the carpet out right. Carpet companies are falling over themselves willing to finance the installation of new flooring up to 2 years. Another solution is perhaps rolling a portion of your closing costs into the loan so that it could help free up cash for carpet or some cosmetic repairs. As far as paint, most companies charge between $1 – $1.50 per square foot to repaint interior of a home.
Sweat equity saves a ton. Some past clients of mine opted to paint on their own home over time and even went as far as renting scaffolding from Home Depot. That cost them $60 for the week and they bought 10 gallons of paint to cover the entire downstairs-about $100. It took them roughly 3-4 days to meticulously paint the downstairs where they had 18 ft ceilings similar to this house. The difference was that they had to protect their carpet/furniture and in this case you would not have to since the carpet needs replacement. This saved them $2000.
In some cases your first mortgage payment would not be due until 30-45 after you close, so that would give you plenty of night and weekend time to prep your home for move in if you you schedule your closing date, move out, and move in time correctly.
What if?
So if one were to purchase the home at its current price per square foot, rehab the house, the difference could mean up to $10 per square foot value increase. If you went all out and upgraded the kitchen, baths and house through out, up to $15+ per square foot could be attainable if marketed today. This number could very well be higher a year from now.
I broke the the numbers down for the homes in the area comparable homes 6 months at a time for the last 18 months. From June 05 till March 06, comparable homes sold in the neighborhood averaged $80.42 per square foot. That number increase to $82.48 per square foot during the months of March 06 till September 06. Currently similar homes are seeing $83.42 (conservatively) per square foot since September till today. This shows a pattern of neighborhood appreciation. This particular house is currently at $75.08 per square foot.
So with the right home improvement decisions, proper guidance, a good deal and investment could be had. Could you imagine a different home if you walked into it? If not you could let a steal pass you by.
Christopher
