Good conversation. All good points.
It's an interesting market.
I own a rental on the south side of FW. 5508 Wentworth ST. 76132. I picked it up for $43k over 10 years ago. The homes in this are are all ~1100 sqft 3-2-2, 1960 brick construction homes. Most have foundation issues. The property next door to my rental at 5504 Wentworth sold for $105K to an investor a few years ago. It had a nice permitted addition that had been cut into the roof properly to look like original construction and had legitimately increased the square footage to 1800 sqft. I thought $105K was a fair price but certainly not a steal for an investor. Imagine my surprise when the investor proceeded to rip out everything down to the studs and perform a beautiful and expensive (~50K) interior re-habitation. Then he listed it for sale at $210K.
So, the largest house in the so-so neighborhood surrounded by homes nearly half its size was purchased for fair market value, gutted, improved to the tune of $50K and advertised for sale at more than double the comps of immediately adjacent homes.
Well, I thought, "what an idiot". He has watched too many episodes of "Flip this House". By any reasonable model he has done everything wrong. Bought the biggest house in a so-so neighborhood at top market value and then remodeled it to look like a new model home inside less the vaulted ceilings and open floor plans that come with similar priced new construction homes. He will be lucky to get his money back much less turn a profit. Right?
I will be damned if he didn't sell it for his asking price 2 months later. A couple from California relocating to DFW bought it. Of course. So, what is to be learned from that deal. I was wrong? He was right? No, this is just a one-off event.
"Even a blind hog finds an acorn occasionally!"
The hotter a market the more well fed the blind hogs become. He was not smart. He was lucky. It is not a sustainable model for continued success. I think Robin and others who have been doing this for a long time want to pass on methods that will increase a "Newbies" probability of success. I appreciate that.
The 70% ARV less remodeling costs model builds in some safety margin and increases your probability of not getting hurt too bad on something you misjudged or overlooked.
