An investor at a real estate auction is ready to bid on an old 1,400 SF, three bedroom, one bathroom house. It is outdated but structurally sound; the interior needs a lot of work. The buyer intends to purchase it, renovate, and resell it for a profit.

Given the following budget and the expectation that it can be resold for $392,000 after completion of the renovation, how much can the investor afford to pay and still stay within budget?

Direct costs of renovation work: $ 45,000

Indirect costs (Architect, Permits): 3,500

Contingency: 5% of direct costs

Marketing and closing costs: 7% of resale price

Overhead & Profit: 10% of resale price

Maximum purchase price to stay within the budget: