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Hoping To Save House From Demolition

MariaRemarque

Thread Starter
Freshman Member
Joined
Nov 8, 2019
Professional Status
General Public
State
Florida
Thanks in advance for any advice.

I'm considering purchasing a Mid-Century Modern home in Florida that is in Flood Zone AE8. It's BFE is only about 6 feet. While it could obviously flood tomorrow, it has never flooded since it was built in 1957.

The current owner began renovations but stopped when he developed health problems. The house is approximately 2000 square feet. The interior has been gutted to the framing. According to my contractor, it appears structurally sound. Rewiring is about half done as are new plumbing lines. The roof was replaced last year.

Because of the condition of the house, it would be a cash purchase for land value. I'm not looking for an appraisal for a loan, but an appraisal of the structure itself in its current condition. My concern is that my contractor estimates the renovation will cost $70K (This doesn't include the cost to restore the terrazzo floors and other work I can do later that doesn't require a permit.)

The county currently values the structure at $90K and they typically add 20% for "true value", so about $108K.

As you probably know, a non-conforming house would either have to be brought up to code by elevating it (not feasible) or it will have to be torn down if renovation costs exceed 50% of the value.

Is there any possibility that a 2000SF gutted house, just the structure, could appraise for $140K?

While I could build new on the lot, I really hope this gem can be saved.

Thanks again.
 

Lee in L.A.

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
I don't think anyone here can give you a definitive answer without seeing it and doing an appraisal.
It would be a complicated appraisal, and not cheap. :shrug:
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
My concern is that my contractor estimates the renovation will cost $70K .................................. or it will have to be torn down if renovation costs exceed 50% of the value.........................................Is there any possibility that a 2000SF gutted house, just the structure, could appraise for $140K?...........
I would say very slim to none but that is in my world. We know nothing about your world.

On another topic:

While your contractor may say the cost is $70,000 that is not the real cost of the project as there are soft costs and that includes what we call Entrepreneurial Incentive. If someone is going to renovate the house they have to be paid for their time, talent, risk and the hopes of a future reward (which is profit). When I do these I take the cost and add 20% for contingency (a fund for what could be unforeseen) so now your costs are ~$85,000. BUT, you have to acquire the home first. Let us say it is currently worth $110,000 and the land value is $50,000.

The cost to get the house is $160,000 and the cost to fix it up is $85,000 for a total of $245,000. The investor who buys this in my world will then add on the 20-25% EI that is required in this market or ~$50,000-$60,000. For the investor to touch it, and be worth his time, talent, management, risk and possible reward (profit) the house would need to be worth about $300,000 when it is done.
 

MariaRemarque

Thread Starter
Freshman Member
Joined
Nov 8, 2019
Professional Status
General Public
State
Florida
I don't think anyone here can give you a definitive answer without seeing it and doing an appraisal.
It would be a complicated appraisal, and not cheap. :shrug:
Thank you for your response.
I would say very slim to none but that is in my world. We know nothing about your world.

On another topic:

While your contractor may say the cost is $70,000 that is not the real cost of the project as there are soft costs and that includes what we call Entrepreneurial Incentive. If someone is going to renovate the house they have to be paid for their time, talent, risk and the hopes of a future reward (which is profit). When I do these I take the cost and add 20% for contingency (a fund for what could be unforeseen) so now your costs are ~$85,000. BUT, you have to acquire the home first. Let us say it is currently worth $110,000 and the land value is $50,000.

The cost to get the house is $160,000 and the cost to fix it up is $85,000 for a total of $245,000. The investor who buys this in my world will then add on the 20-25% EI that is required in this market or ~$50,000-$60,000. For the investor to touch it, and be worth his time, talent, management, risk and possible reward (profit) the house would need to be worth about $300,000 when it is done.
Thank you so much for your responses.

While I don't flip houses, I have done a couple of quick resales of foreclosure auctions. I know my limitations and realize even experienced investors can find it challenging to make a profit renovating and flipping houses. You make your money when you buy, as they say.

This house is where I plan to live for the foreseeable future, so I'm not looking for the profit I normally would. I'm just trying not to let my heart overrule my head.
 
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