# How much would you pay?



## Berubeland (Sep 6, 2009)

Ok I am considering buying a piece of property. 

It is a one acre lot with a old school house on it. There is no hydro, no approved septic, no well. There are animals living in it 

There is hydro at the property line.

The well is there and I did have it tested and it failed, however I was unable to perform the test according to the test guidelines because there is no pump working due to lack of hydro. 

It is rural. 

Now houses that are livable sell for about 185K 

They did sell a large parcel of land across the street for development for about 10K per acre but that was a large number of lots

A few miles away they currently have 88,000 lots for sale but they are 2 acres. 

Several years back a similar old school house was sold but it had hydro, well and septic. They were asking $100,000. The lot was flatter and in a better area. 

How much would you pay?


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## stinsont (May 29, 2009)

I would take the $100k and deduct expenses for essentials from the base cost.

IE:
$100k - cost for Hydro, Septic, Well = purchase price. I might even consider deducting a portion of the expenses to remove the old school house.

Thats what I'd do...


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## FrugalTrader (Oct 13, 2008)

Depends on what the purpose of the property is. If it's going to be a rental, then it would depend on how much I could get in rent and how much it would cost to get it up to spec. Are you planning on tearing down the house? Renovating it?


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## Berubeland (Sep 6, 2009)

There is quite a bit of demolition to do in that the front sunroom is not salvageable, the old school house itself the foundation looks pretty good. There was a renovation where panel was put up over the old architecture, bead board ceiling is in good shape, and bead board walls and possible the original pine floors might be brought back after removing a layer of asphalt tile and chip board. 

The building also needs a roof, heating, electrical.

Basically I would strip all the walls down to the original, stop assess and regroup from there. 

It is very difficult to evaluate at this point what can be salvaged and what cannot. It seems that most of the original schoolhouse elements are there behind the panel. Of course there is no guarantee that it has been kept everywhere. 

My thought is that I would be willing to pay for the lot and the shell less costs of demolition for the front porch and this layer of renovation. I'm not sure what that would be. Any thought are appreciated.

Also.... it's a cash only project no one will mortgage this kind of building. This does affect the value of the property.

This one would be a flip.


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## Dana (Nov 17, 2009)

This sounds like a land-value-only situation. You are buying the lot for it's potential development and location only. I would not include the schoolhouse in my valuation - except for removal and demolition costs. If it turns out to be salvageable that's good, but if not at least you've already factored that in. 

Since there is so much development going on in the area, does the municipality plan to run municipal services (water) to the area?

I have never flipped a house, so I am not speaking from experience. Did you have to have an environmental assessment for the well?


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## FrugalTrader (Oct 13, 2008)

If it's a flip, I would value at:

Market value after flip
- expenses
- fudge factor
- expected profit
= purchase price

However, this is what I gather from books etc as I have no experience in flips, so take it for what it's worth.


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## gman (Jan 23, 2010)

Before you buy this you need to make sure the land percs for a proper septic field or else it could cost you a fortune to put some sort of septic system on the property. Also you have to make sure the well is ok. The improvements sound like there worthless so they may actually deter from the land value and you say hydro is to the lot line but how close is it to were the building site is? If you have to put a pole in or something like that it can also add to your costs. You also say that houses in the area sell for 185K, which isn't very much indicating that land values in the area aren't very high. All in all without looking a actual sales data and the property it sounds like it can't be worth more then $30 to $50K.


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## Four Pillars (Apr 5, 2009)

I have no idea what to pay. I think this is going to be very risky since there are so many unknowns. From the sounds of it - you are extremely qualified to take this on but be prepared for the possibility of losing $$.


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## OhGreatGuru (May 24, 2009)

_How much would you pay?_

Nothing, since at this stage in my life I am not interested in taking on a project like this. Real estate is only "worth" what people are willing to pay for it. But, if you want a guesstimate, take $185 (current market value of new homes in the area)
Deduct cost of demolition;
Deduct cost of building new house or renovating old building into equivalent;
Deduct "cost" of your time if you are doing it yourself;
Deduct cost of servicing lot;
Deduct legal, real estate, & investigation costs;
Deduct what you think is a fair profit margin;
and you should arrive at a price for the current property.


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