The House Just Needs Paint and Carpet…

This is one of the most common things I hear in the business.  “Hey, you will love this house, it’s turnkey, it just needs paint and carpet.”

Depending who it is, there are two reactions:

If this person is telling the truth:

So if this is true and the house just needs paint and carpet, why is the Seller going to cut me a deal?  Typically banks and even FHA will loan on houses with old carpet and walls that need painting.  How am I going to compete with an owner-occupant.

If there aren’t other offers, why is no retail buyer interested.  You’re telling me if I paint the walls and put in new carpet that will want them to pay me enough extra to cover the cost of the supplies, real estate commissions, closing costs and a decent profit for me?  It’s a tough sale for me.

When an underwriter starts underwriting the loan, see the appraisal and what I did to the property are they going to feel comfortable giving me a profit just for paying for paint and carpet.  I’m not saying they won’t, but it’s a tougher sale.

Note: If I am renting the house I am not as worried.

If the person is not telling the truth:

They’re calling me a deal and they say it only needs paint and carpet.  I show up to a missing kitchen, a leaky roof.  They’ve qualified this as a “great deal” based on 3,000 in repairs and now I need to tell them I need to budget 15,000.

Now what is music to my ears:

This house is disgusting, I don’t want to even go inside, the City is threatening to demolish it and the Seller is telling me to sell it NOW. We have actually bought more than one house where the Bank has got quotes for the cost of demolishing it entirely.

Note: in this regard I am probably not typical to other investors.  We focus on projects that need substantial repairs.

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