Out of State Investing Gone Wrong? Columbus, OH

[Qasim Naeem]

Hi BP fam - 

Earlier this year, I jumped on this out of state investing bandwagon and got a an off market deal. It is a SFH which was going to be a long term hold for me and a couple of partners. Here are the details on the property:

3 bed 1.5 bath - 1346 sqft., Purchase Price: $110,000

The initial plan was to keep this property as a rental after doing some slight fixes and the plan was to not spend more than $6-8K on those fixes. Also, the hope was that this would comfortably rent out at 1100-1200 per month once we do some minor repairs and cleanup. We inherited a tenant who was paying $775 per month on a month to month lease. When this tenant moved out after a month of closing and when our PM sent in a contractor to create a move-out inspection report, they notified us with a lot of issues with the property where some of them were quite major. They noticed termites, rodents and a ground hog issue. We got a few more opinions from other GCs and they confirmed those issues and one major issue that was highlighted was with the structure/foundation of the house. There are some major issues there. The estimated repairs we have received are ranging from $25K-35K. We were never planning to spend this much on the property and it is hard to instantly come up with this much cash, and it is even harder to drop that much money when I am not sure if I would be able to recoup it.

Moreover, we are not 100% sure that the Scope of Work we have would take care of all the issues especially the structural ones. After a lot of back and forth between us partners and GCs we have decided to sell the property. It has been listed on the market for almost a month now. There have been a lot of showings but no serious offers as yet. Our agent who got us this property in the first place has also suggested that we do some minimal repairs however, I personally think that the structural issue has to be taken care of before we do anything else and that alone is not cheap.

In a nutshell, we pulled the trigger too quickly, did not do enough due diligence that we should have done and gave in to the opinion of others, and let emotions take control of our decision making process. However, I think the agent should have done some part of their job and should have kept our best interest at heart as well. They could have steered us away from it or at least highlighted these issues for us but it could be a possible that they were rookies too and did not know exactly what they were doing. But primarily it was our duty to thoroughly pencil out what we were buying. A lot of mistakes made and lessons learned. I would like to figure the ideal solution for this property and that is why I am turning to BP community for their knowledge. Please let me know if anybody has any specific questions on this deal.

Thank you all in advance! - Qasim

@Dustin Thomas @Account Closed @Lex Wilridge @Henry Zhu

[Remington Lyman]

Quote from @Qasim Naeem:

Hi BP fam - 

Earlier this year, I jumped on this out of state investing bandwagon and got a an off market deal. It is a SFH which was going to be a long term hold for me and a couple of partners. Here are the details on the property:

3 bed 1.5 bath - 1346 sqft., Purchase Price: $110,000

The initial plan was to keep this property as a rental after doing some slight fixes and the plan was to not spend more than $6-8K on those fixes. Also, the hope was that this would comfortably rent out at 1100-1200 per month once we do some minor repairs and cleanup. We inherited a tenant who was paying $775 per month on a month to month lease. When this tenant moved out after a month of closing and when our PM sent in a contractor to create a move-out inspection report, they notified us with a lot of issues with the property where some of them were quite major. They noticed termites, rodents and a ground hog issue. We got a few more opinions from other GCs and they confirmed those issues and one major issue that was highlighted was with the structure/foundation of the house. There are some major issues there. The estimated repairs we have received are ranging from $25K-35K. We were never planning to spend this much on the property and it is hard to instantly come up with this much cash, and it is even harder to drop that much money when I am not sure if I would be able to recoup it.

Moreover, we are not 100% sure that the Scope of Work we have would take care of all the issues especially the structural ones. After a lot of back and forth between us partners and GCs we have decided to sell the property. It has been listed on the market for almost a month now. There have been a lot of showings but no serious offers as yet. Our agent who got us this property in the first place has also suggested that we do some minimal repairs however, I personally think that the structural issue has to be taken care of before we do anything else and that alone is not cheap.

In a nutshell, we pulled the trigger too quickly, did not do enough due diligence that we should have done and gave in to the opinion of others, and let emotions take control of our decision making process. However, I think the agent should have done some part of their job and should have kept our best interest at heart as well. They could have steered us away from it or at least highlighted these issues for us but it could be a possible that they were rookies too and did not know exactly what they were doing. But primarily it was our duty to thoroughly pencil out what we were buying. A lot of mistakes made and lessons learned. I would like to figure the ideal solution for this property and that is why I am turning to BP community for their knowledge. Please let me know if anybody has any specific questions on this deal.

Thank you all in advance! - Qasim

@Dustin Thomas @Account Closed @Lex Wilridge @Henry Zhu

 What is the address?

[Adam Macias]

I've had deals fall out a few times as a wholesaler. Even when I thought everything i was dotted and every t crossed. Sometimes you can only do so much. You took a chance. You started. You still made it happen. Thanks for being so transparent.

[Qasim Naeem]

Quote from @Remington Lyman:

Quote from @Qasim Naeem:

Hi BP fam - 

Earlier this year, I jumped on this out of state investing bandwagon and got a an off market deal. It is a SFH which was going to be a long term hold for me and a couple of partners. Here are the details on the property:

3 bed 1.5 bath - 1346 sqft., Purchase Price: $110,000

The initial plan was to keep this property as a rental after doing some slight fixes and the plan was to not spend more than $6-8K on those fixes. Also, the hope was that this would comfortably rent out at 1100-1200 per month once we do some minor repairs and cleanup. We inherited a tenant who was paying $775 per month on a month to month lease. When this tenant moved out after a month of closing and when our PM sent in a contractor to create a move-out inspection report, they notified us with a lot of issues with the property where some of them were quite major. They noticed termites, rodents and a ground hog issue. We got a few more opinions from other GCs and they confirmed those issues and one major issue that was highlighted was with the structure/foundation of the house. There are some major issues there. The estimated repairs we have received are ranging from $25K-35K. We were never planning to spend this much on the property and it is hard to instantly come up with this much cash, and it is even harder to drop that much money when I am not sure if I would be able to recoup it.

Moreover, we are not 100% sure that the Scope of Work we have would take care of all the issues especially the structural ones. After a lot of back and forth between us partners and GCs we have decided to sell the property. It has been listed on the market for almost a month now. There have been a lot of showings but no serious offers as yet. Our agent who got us this property in the first place has also suggested that we do some minimal repairs however, I personally think that the structural issue has to be taken care of before we do anything else and that alone is not cheap.

In a nutshell, we pulled the trigger too quickly, did not do enough due diligence that we should have done and gave in to the opinion of others, and let emotions take control of our decision making process. However, I think the agent should have done some part of their job and should have kept our best interest at heart as well. They could have steered us away from it or at least highlighted these issues for us but it could be a possible that they were rookies too and did not know exactly what they were doing. But primarily it was our duty to thoroughly pencil out what we were buying. A lot of mistakes made and lessons learned. I would like to figure the ideal solution for this property and that is why I am turning to BP community for their knowledge. Please let me know if anybody has any specific questions on this deal.

Thank you all in advance! - Qasim

@Dustin Thomas @Account Closed @Lex Wilridge @Henry Zhu

 What is the address?

 1593 Kenmore Rd

[Matt M.]

I don’t know the Columbus market, but if you paid $110k and it needs $30k+ work, and you’ve had no offers, it’s time to get closer to your purchase price and hope you don’t lose money. My experience tell me, especially in this market, if it’s priced right it goes in days or hours..  

[Randy Gutierrez]

Can you potentially flip it? What's the ARV for the area? Start networking with wholesalers in the area and reach out to every investor friendly real estate agent in the area to get you a potential buyer.

Why weren't these issues found during the inspection?

[Qasim Naeem]

Quote from @Randy Gutierrez:

Can you potentially flip it? What's the ARV for the area? Start networking with wholesalers in the area and reach out to every investor friendly real estate agent in the area to get you a potential buyer.

Why weren't these issues found during the inspection?

We can possibly do that, but having the funds to execute that is the issue. ARV is ~190k for this sized house. 

thanks for the suggestion. I will talk to some more agents and wholesalers who can find us a buyer in the as is condition. 

The inspection report briefly said, joists might need to be reinforced. And we took that as something that we can take care of down the lane. The biggest mistake was not paying another $400 and getting an inspection done and not relying on the month old report that the agent sent us. 

[Ed W.]

@Qasim Naeem  You've certainly earned my respect (not that you need it) for being so frank about your errors.  One of the most important lessons here for you and for others is that this is a very unforgiving business. The costs of mistakes often have thousands of dollars associated with them and you cannot rely upon anyone but yourself to determine value (and how condition, location, and other factors can affect that value). It is a mistake to rely upon real estate agents for this.  Even the most honest can make mistakes and, unfortunately, my experience is that most don't have the knowledge to make the determinations that an inspector, for example, would have and, at least some of them will care a lot more about the commission and what happens to you after the sale.  I had an agent tell me one time that house identical to all the other houses on the street was worth what all of the others were worth (about $200k) but I was certain it was worth about $40 - $50k less.  Time proved me to be correct.  If you can't afford to fly to protect your potential investment, I strongly urge you to not purchase.

[Andrew Syrios]

Out of state deals are fraught with danger and I always recommend restraint when doing so. I've seen it go badly quite a few times and our first deal in KC, which we bought before I moved out here to open a second branch, went quite badly. Lots of due diligence and caution is critical when investing out of state or even out of city.

[Steven Foster Wilson]

Quote from @Qasim Naeem:

Hi BP fam - 

Earlier this year, I jumped on this out of state investing bandwagon and got a an off market deal. It is a SFH which was going to be a long term hold for me and a couple of partners. Here are the details on the property:

3 bed 1.5 bath - 1346 sqft., Purchase Price: $110,000

The initial plan was to keep this property as a rental after doing some slight fixes and the plan was to not spend more than $6-8K on those fixes. Also, the hope was that this would comfortably rent out at 1100-1200 per month once we do some minor repairs and cleanup. We inherited a tenant who was paying $775 per month on a month to month lease. When this tenant moved out after a month of closing and when our PM sent in a contractor to create a move-out inspection report, they notified us with a lot of issues with the property where some of them were quite major. They noticed termites, rodents and a ground hog issue. We got a few more opinions from other GCs and they confirmed those issues and one major issue that was highlighted was with the structure/foundation of the house. There are some major issues there. The estimated repairs we have received are ranging from $25K-35K. We were never planning to spend this much on the property and it is hard to instantly come up with this much cash, and it is even harder to drop that much money when I am not sure if I would be able to recoup it.

Moreover, we are not 100% sure that the Scope of Work we have would take care of all the issues especially the structural ones. After a lot of back and forth between us partners and GCs we have decided to sell the property. It has been listed on the market for almost a month now. There have been a lot of showings but no serious offers as yet. Our agent who got us this property in the first place has also suggested that we do some minimal repairs however, I personally think that the structural issue has to be taken care of before we do anything else and that alone is not cheap.

In a nutshell, we pulled the trigger too quickly, did not do enough due diligence that we should have done and gave in to the opinion of others, and let emotions take control of our decision making process. However, I think the agent should have done some part of their job and should have kept our best interest at heart as well. They could have steered us away from it or at least highlighted these issues for us but it could be a possible that they were rookies too and did not know exactly what they were doing. But primarily it was our duty to thoroughly pencil out what we were buying. A lot of mistakes made and lessons learned. I would like to figure the ideal solution for this property and that is why I am turning to BP community for their knowledge. Please let me know if anybody has any specific questions on this deal.

Thank you all in advance! - Qasim

@Dustin Thomas @Account Closed @Lex Wilridge @Henry Zhu

Are you using the same Realtor? Can you post pictures or send the listing? I always plan for the worst and run my numbers very conservatory. My first property we got with a FHA loan, second week in the pipes bursted and we had to redo all the plumbing. That was just one of the many other problems we ran into.

[Qasim Naeem]

Quote from @Steven Foster Wilson:

Quote from @Qasim Naeem:

Hi BP fam - 

Earlier this year, I jumped on this out of state investing bandwagon and got a an off market deal. It is a SFH which was going to be a long term hold for me and a couple of partners. Here are the details on the property:

3 bed 1.5 bath - 1346 sqft., Purchase Price: $110,000

The initial plan was to keep this property as a rental after doing some slight fixes and the plan was to not spend more than $6-8K on those fixes. Also, the hope was that this would comfortably rent out at 1100-1200 per month once we do some minor repairs and cleanup. We inherited a tenant who was paying $775 per month on a month to month lease. When this tenant moved out after a month of closing and when our PM sent in a contractor to create a move-out inspection report, they notified us with a lot of issues with the property where some of them were quite major. They noticed termites, rodents and a ground hog issue. We got a few more opinions from other GCs and they confirmed those issues and one major issue that was highlighted was with the structure/foundation of the house. There are some major issues there. The estimated repairs we have received are ranging from $25K-35K. We were never planning to spend this much on the property and it is hard to instantly come up with this much cash, and it is even harder to drop that much money when I am not sure if I would be able to recoup it.

Moreover, we are not 100% sure that the Scope of Work we have would take care of all the issues especially the structural ones. After a lot of back and forth between us partners and GCs we have decided to sell the property. It has been listed on the market for almost a month now. There have been a lot of showings but no serious offers as yet. Our agent who got us this property in the first place has also suggested that we do some minimal repairs however, I personally think that the structural issue has to be taken care of before we do anything else and that alone is not cheap.

In a nutshell, we pulled the trigger too quickly, did not do enough due diligence that we should have done and gave in to the opinion of others, and let emotions take control of our decision making process. However, I think the agent should have done some part of their job and should have kept our best interest at heart as well. They could have steered us away from it or at least highlighted these issues for us but it could be a possible that they were rookies too and did not know exactly what they were doing. But primarily it was our duty to thoroughly pencil out what we were buying. A lot of mistakes made and lessons learned. I would like to figure the ideal solution for this property and that is why I am turning to BP community for their knowledge. Please let me know if anybody has any specific questions on this deal.

Thank you all in advance! - Qasim

@Dustin Thomas @Account Closed @Lex Wilridge @Henry Zhu

Are you using the same Realtor? Can you post pictures or send the listing? I always plan for the worst and run my numbers very conservatory. My first property we got with a FHA loan, second week in the pipes bursted and we had to redo all the plumbing. That was just one of the many other problems we ran into.

 Hi Steven - I have messaged you the link.

[Qasim Naeem]

Quote from @Ed W.:

@Qasim Naeem  You've certainly earned my respect (not that you need it) for being so frank about your errors.  One of the most important lessons here for you and for others is that this is a very unforgiving business. The costs of mistakes often have thousands of dollars associated with them and you cannot rely upon anyone but yourself to determine value (and how condition, location, and other factors can affect that value). It is a mistake to rely upon real estate agents for this.  Even the most honest can make mistakes and, unfortunately, my experience is that most don't have the knowledge to make the determinations that an inspector, for example, would have and, at least some of them will care a lot more about the commission and what happens to you after the sale.  I had an agent tell me one time that house identical to all the other houses on the street was worth what all of the others were worth (about $200k) but I was certain it was worth about $40 - $50k less.  Time proved me to be correct.  If you can't afford to fly to protect your potential investment, I strongly urge you to not purchase.

Thanks Ed for the kind words! Every word you said is right. Hopefully we will get out of this soon but a lot of things to keep in mind when I go for my next investment. Also, we did drive to see the property in person but as I said, emotional decision making and excitement got the most of us. We identified those issues to be minor and told ourselves that we can take care of them within the amount of money we were initially planning to spend.

[Scott Mac]

Would more parking add to the value in that neighborhood?

A Mockup with more parking:

[Jorge Velastegui]

Thanks for sharing! Good luck!

[Randy Gutierrez]

Tough lessons to be learned here unfortunately. Definitely don't gloss over the capital expenses such as foundation, electrical, plumbing, HVAC, and roof. If there is even a mention of these issues just assume the worst because the mere fact that they are even being mentioned should be a red flag. If the ARV is 190k, to me it seems there is still a lot of meat left on this bone. Running my Home Flipping calculator (DealCheck) with the information you provided 110k PP, 190k ARV, 55k rehab (financed) you can walk away breaking pretty much even. Not ideal especially given the overall market conditions but at least you can reset if it pans out. HELOC, Private money from friends/families, or even a personal loan can help you acquire the needed capital. Also not ideal but the sale proceeds will cover the original loan amount and the rehab loan. Definitely try to unload the property first with a wholesaler or agent prior to going this route.

[Patrick Kaiser]

Quote from @Qasim Naeem:

Quote from @Randy Gutierrez:

Can you potentially flip it? What's the ARV for the area? Start networking with wholesalers in the area and reach out to every investor friendly real estate agent in the area to get you a potential buyer.

Why weren't these issues found during the inspection?

We can possibly do that, but having the funds to execute that is the issue. ARV is ~190k for this sized house. 

thanks for the suggestion. I will talk to some more agents and wholesalers who can find us a buyer in the as is condition. 

The inspection report briefly said, joists might need to be reinforced. And we took that as something that we can take care of down the lane. The biggest mistake was not paying another $400 and getting an inspection done and not relying on the month old report that the agent sent us. 

 The joists needing to be reinforced if that is truly the issue does not seem like a $25-$30k problem. Obviously I'm not an expert in that area and houses on this kind of framing are not common in my area, but I have sold 2 in this condition with cracked joists under the house. We were quoted $15,000 by one contractor. Then we had it inspected by an engineer who said that it just needed to be, and I forget the terminology, but they left it with a jack and just screw 2x6's on each side the length of the split. The engineer cost $600 and that included 2 trips, before and after, and we found a contractor who said it was going to be $600 but I told him if he can get it done in 2 days we pay him and extra $300. So he did. We got the property sold for $1500 repair costs. 

Another house with similar issues we paid a contractor to fix before listing and then it passed inspection with no structural engineer needed. Total was less than $1000. 

It's possible your problems  are more extensive than mine were, if there is real problem with the whole foundation of the house settling and requiring massive undertaking to life the house, reinforce the foundation, etc, but if the problem is seriously just some cracked floor joists, then a structural engineer and a licensed framer should be able to take care of these problems in my limited experience for a few thousand dollars. 

[Qasim Naeem]

Quote from @Randy Gutierrez:

Tough lessons to be learned here unfortunately. Definitely don't gloss over the capital expenses such as foundation, electrical, plumbing, HVAC, and roof. If there is even a mention of these issues just assume the worst because the mere fact that they are even being mentioned should be a red flag. If the ARV is 190k, to me it seems there is still a lot of meat left on this bone. Running my Home Flipping calculator (DealCheck) with the information you provided 110k PP, 190k ARV, 55k rehab (financed) you can walk away breaking pretty much even. Not ideal especially given the overall market conditions but at least you can reset if it pans out. HELOC, Private money from friends/families, or even a personal loan can help you acquire the needed capital. Also not ideal but the sale proceeds will cover the original loan amount and the rehab loan. Definitely try to unload the property first with a wholesaler or agent prior to going this route.

This is great! Thanks for your suggestions, and definitely a lesson learnt for next time.
I am working on it, hopefully it sells as is but otherwise it would probably going a loan route.

[Qasim Naeem]

Quote from @Patrick Kaiser:

Quote from @Qasim Naeem:

Quote from @Randy Gutierrez:

Can you potentially flip it? What's the ARV for the area? Start networking with wholesalers in the area and reach out to every investor friendly real estate agent in the area to get you a potential buyer.

Why weren't these issues found during the inspection?

We can possibly do that, but having the funds to execute that is the issue. ARV is ~190k for this sized house. 

thanks for the suggestion. I will talk to some more agents and wholesalers who can find us a buyer in the as is condition. 

The inspection report briefly said, joists might need to be reinforced. And we took that as something that we can take care of down the lane. The biggest mistake was not paying another $400 and getting an inspection done and not relying on the month old report that the agent sent us. 

 The joists needing to be reinforced if that is truly the issue does not seem like a $25-$30k problem. Obviously I'm not an expert in that area and houses on this kind of framing are not common in my area, but I have sold 2 in this condition with cracked joists under the house. We were quoted $15,000 by one contractor. Then we had it inspected by an engineer who said that it just needed to be, and I forget the terminology, but they left it with a jack and just screw 2x6's on each side the length of the split. The engineer cost $600 and that included 2 trips, before and after, and we found a contractor who said it was going to be $600 but I told him if he can get it done in 2 days we pay him and extra $300. So he did. We got the property sold for $1500 repair costs. 

Another house with similar issues we paid a contractor to fix before listing and then it passed inspection with no structural engineer needed. Total was less than $1000. 

It's possible your problems  are more extensive than mine were, if there is real problem with the whole foundation of the house settling and requiring massive undertaking to life the house, reinforce the foundation, etc, but if the problem is seriously just some cracked floor joists, then a structural engineer and a licensed framer should be able to take care of these problems in my limited experience for a few thousand dollars. 

 Hey Patrick, thanks for such a detailed response. What I have heard from the contractors are two things. On the front of the house, the front porch is off level onto the right/leaning to the right, and the second thing highlighted is that in the basement, the main beam is damaged. I’m not sure if these two problems are the same or are these two separate issues requiring separate amounts of money to be spent to be fixed. It is possible that the damage beam can be reinforced with your solution. Who can confirm this for me? Structural engineer? I feel like contractors are just guessing. If you’re in the Columbus market, let me know if you have anyone you can recommend.

[Mauricio A.]

Can you get a hard-money loan/private loan, repair it and pay it back after you sell it given the ARV while pocketing the leftovers?

[Jonathan R McLaughlin]

@Qasim Naeem gonna go with @Patrick Kaiser here that reinforcing joists isn’t the end of the world or incredibly expensive. Lilly columns and sister-in-law might have a certain duct tapped together look but can usually solve the problem. Is there bowing in the house or major cracks inside?

If the ARV is REALLY 190k you should fix it. The losses may have tax benefits and u are still in the black, yes? Analyze paydown after 5 and consider a 1031.

Dreams deferred don’t always shrivel.

[Patrick Kaiser]

Quote from @Qasim Naeem:

Quote from @Patrick Kaiser:

Quote from @Qasim Naeem:

Quote from @Randy Gutierrez:

Can you potentially flip it? What's the ARV for the area? Start networking with wholesalers in the area and reach out to every investor friendly real estate agent in the area to get you a potential buyer.

Why weren't these issues found during the inspection?

We can possibly do that, but having the funds to execute that is the issue. ARV is ~190k for this sized house. 

thanks for the suggestion. I will talk to some more agents and wholesalers who can find us a buyer in the as is condition. 

The inspection report briefly said, joists might need to be reinforced. And we took that as something that we can take care of down the lane. The biggest mistake was not paying another $400 and getting an inspection done and not relying on the month old report that the agent sent us. 

 The joists needing to be reinforced if that is truly the issue does not seem like a $25-$30k problem. Obviously I'm not an expert in that area and houses on this kind of framing are not common in my area, but I have sold 2 in this condition with cracked joists under the house. We were quoted $15,000 by one contractor. Then we had it inspected by an engineer who said that it just needed to be, and I forget the terminology, but they left it with a jack and just screw 2x6's on each side the length of the split. The engineer cost $600 and that included 2 trips, before and after, and we found a contractor who said it was going to be $600 but I told him if he can get it done in 2 days we pay him and extra $300. So he did. We got the property sold for $1500 repair costs. 

Another house with similar issues we paid a contractor to fix before listing and then it passed inspection with no structural engineer needed. Total was less than $1000. 

It's possible your problems  are more extensive than mine were, if there is real problem with the whole foundation of the house settling and requiring massive undertaking to life the house, reinforce the foundation, etc, but if the problem is seriously just some cracked floor joists, then a structural engineer and a licensed framer should be able to take care of these problems in my limited experience for a few thousand dollars. 

 Hey Patrick, thanks for such a detailed response. What I have heard from the contractors are two things. On the front of the house, the front porch is off level onto the right/leaning to the right, and the second thing highlighted is that in the basement, the main beam is damaged. I’m not sure if these two problems are the same or are these two separate issues requiring separate amounts of money to be spent to be fixed. It is possible that the damage beam can be reinforced with your solution. Who can confirm this for me? Structural engineer? I feel like contractors are just guessing. If you’re in the Columbus market, let me know if you have anyone you can recommend.

 I am not on Columbus, sorry all the way out here in Phoenix. But I think a structural engineer would be a good start because they are not trying to sell you anything. Let them tell you how to fix it and then probably follow directions. If they tell you it's major, I think you're probably stuck. But maybe you'll get lucky and the contractor was trying to get themselves more business.