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Subject Expert
Spending $380k for a house with an ARV of $400k doesn’t sound like a good idea. Renovations are almost never smooth, and I guarantee you’ll have overages. Plus you have holding costs from the loan(s) and from living somewhere else.
Following!
How are you planning on financing the purchase and subsequent renovations?
Planning to do a renovation loan. So effectively takes the cost of the home + projected cost to renovate. Assuming you’ve done your homework and an appraiser asses the value post renovation as higher than your all in cost, you can borrow this total amount.
So total loan size would be approx 370-380 of which I’d put 20% down. Loan interest would be FNMA 30 YR fixed plus approx 25 basis points.
Subject Expert
In the end you will have more than $400k into the property. If the post renovation value is low $400s why not just buy a renovated house to begin with?
Hi there, thank you again for this comment! We ended up buying one for 395 that’s fully renovated already! Appreciate your support
Maybe reach out to another contractor or two and get a couple bids to compare. Could be cheaper than you think to rehab. What part of DFW? Are you under contract yet?
That is the plan yes! We are not under contract at the moment, but are negotiating with the potential seller at the moment. The area is the “Casa Linda” area or just east of White Rock lake. So still part of Dallas proper.
I would say if it’s 200 for purchase + 180 for renovation after some interest costs and any unexpected items not a ton of room if it would sell for low 400s so I might opt more towards finding something ready to go at that low 400s number.
Ordinarily I would agree, we just really love the location, and a lot of growth is coming to the area. So may not immediately sell for a high amount over total cost but would in 5 years. Considering we plan to stay here for at least that long, that was part of what is driving the decision. Thoroughly appreciate the insight!!