Learning to say "No!"

As a newbie to Real Estate investing who has been lurking in the shadows of BP reading and learning while I get my finances in order, I jumped into actually doing any serious property searches last week. It was sooner than I had planned. I still have some bills I want to pay off to improve my credit rating. And a credit card I wanted paid off. But I am getting antsy and my lease will be up soon, so I actually called about a HUD home that I thought might be worth pursuing. The price seemed right.

I drove by the property and visions of what the house would look like AFTER I got my hands on it filled my head. (Admittedly, I am a dreamer.. but, also, a doer.) I called a realtor and set up an appointment to look inside the house. Of course, I came to BP and read every relevant thing I could about buying a HUD home. I also visited the HUD website, and a few other relevant sites. (The house is near the river so I checked FEMA'S website too.)

My rehab dreams dissipated once I went inside the house. It was constructed in 1938, built on a slab, in a flood plain (despite the realtor telling me otherwise) and appeared to be a manufactured home, or a home constructed in some non-standard fashion. The exposed beams running through the house were a huge turnoff for me. The house lacked a front door so we had to enter through the side door.

I considered what I could charge for rent, deducted the taxes, and the potential costs of flood insurance (which could be very high now that it is no longer being subsidized) and realized this house was not a good investment. I was also concerned about the sewer lines. I did call the city inspector to see if permits had ever been pulled for sewer line work. I had read that older sewer pipes lasted about 50 years. If these hadn't been replaced they could need to be soon. The inspector told me there was no record of permits being pulled, but when asked what else I should consider regarding the house he informed me it was in a flood plain. We discussed the cost of flood insurance (and lateral sewer line repairs) and I thanked him for his help. Talking to him was easier than I had imagined, and I know that in the future I can call him with questions before I make an offer on a home.

Although my ultimate goal is to buy a property in need of repair to live in and remodel, then sell in a few years, I felt really good about deciding not to buy this house. I was glad I checked it out and took action, and feel I learned a lot in the process. I also decided to dump the realtor who told me the house was definitely not in a flood plain, although the FEMA maps and city inspector indicate that it is.

Today I looked at another house with my new realtor, but that is a story for another day... It's time for me to get ready for my day job as a nurse. Thanks for reading!