When the shell lists at 165, the rehab is 140 and the 70 rule says the max offer is 129, which number is wrong?

Your 70 rule number is right and it's also not the number that'll kill you. 129.5 assumes you're out in 90 days.

I'm on my fourth heavy one and I've never done 90 days. Not once. Best was 118, worst was 197. On a 270 all-in with hard money at low double digits plus taxes and insurance and utilities on a vacant house, I'm running about 4,600 a month all in. Two extra months is 9,200 off the top. Four extra months is 18,400, which on a deal like yours is most of what you were going to make.

So when you back into your offer, either take the 70 down to something like 65 or line-item the carry at 150 days and subtract it explicitly. I prefer the second because I can see what I'm paying for.

Also the two dead contracts is information. Ask the agent what killed them. Sometimes it's financing on a house no bank will touch, which helps you. Sometimes it's the inspection found the thing you haven't found yet.

Different angle, and I know it isn't the one you asked for. What's the lot worth empty?

I've been looking at land holdings for two years and in the markets I watch, a vacant three year old shell on a decent lot in a submarket with 385 comps sometimes prices closer to lot value plus demolition than to house value. If teardown plus new build pencils for a builder in your area, your competition for that 165 isn't other flippers, it's someone who never intends to keep the addition at all.

That cuts both ways for you. If the lot alone supports 110 to 130, your downside if the rehab blows up is a lot flatter than it looks. If the lot's worth 40, you're fully exposed to the rebuild.

165 for a shell where finished is 385 reads as a higher cost market problem. Take the other end of the range, where a shell trades at 28k, the finished comp is 119k, and the rehab is the same 140 just written down. That arithmetic is why almost nobody guts anything in those markets. That comparison is useful for one point only. The ratio worth watching is rehab to ARV rather than rehab to purchase. Yours is 140 on 385, so 36 percent. That is above the range people usually quote for heavy work, and it is before the addition surprise. It does not mean no. It means there is no room for a second surprise.

@laurenkim53's 36 percent is the line worth staring at. Take a project underwritten at 31 percent of ARV that ends up at 44 because someone opens a soffit and finds the main stack run through a bearing wall in a way that left the wall doing about half of what it was supposed to. That correction is 22k and five weeks, and it is a common shape on a house of this age. @devon_pierce, on the actual decision, offer at your number with a structural contingency and pay the engineer during the contingency period instead of before. An out of state heir with two fallouts is not going to be insulted by 129 as much as you think. If they say no you have lost nothing but a phone call, and if the addition turns out to be the cheap version you have room to come up. What nobody should do is pay 900 to price a repair on a house they might not get.