So i have visited two properties today and they were one of my preferred ones based on rents/location etc. Heres what happened:
Listed for +100k so i expected something in great shape!! On the outside i kinda had an idea what i am stepping into .. Porch needed paint job.. could see spider webs on windows. First unit i entered was a DISASTER!!! even disaster wouldnt comprehend what i want to say ! Couldnt even see floor because of dirt .. smallest bedroom ever with dirtiest stuff laying around.. for bathroom i had to ask the tenant "is this working and even in use?" had hairs all over ..moldy wet floor and whole unit had disgusting odor!.. i simply cant say enough about this unit.
Second unit: Sigh of releif had clean hardwood floors.. clean kitchen..clean bedroom (windows had spiders etc but looked fine) ..living roof floor squeaked in few places when stepping on those spots..second bedroom was cleanish ..pantry had HOLE in roof with umbrella being used to contain water leakage.. overall no bad odor etc
Third unit: Clean hardwood floors..cluttered kitchen (but thats not relevant to house itself) bedroom was clean ..bathroom had hole in floor near bathtub and when stepped on it moved downwards and seemed like cant withstand too much weight.. two broken windows but still intact.. had similar hole in one room being used as storage.
Basement was cold and seemed to have moist air.. yellow glue like stuff used to seal around windows and pipes.. very cluttered.
Most of stairs in house squeaked and some felt loose.
Noway im paying +100k for this i wouldnt even consider this 3 unit but 2 as one of unit was not liveable at all !!!
Listed for +50k Got to see only 1/3 units.
Common entrance was SMELLY as in ALL kind of smells !.. Floor in kitchen was UNEVEN (Had a dip in middle) and same with bathroom and was very obvious uneven floor.. bedroom were all plain ..hardwood floor which needed to be replaced all over !
So what do i make of all this? Would i find all properties like this in +50k range? Where do i compromise and where i shouldnt ? I dont think i would let my tenants live in place full of bad odor or broken roofs !
You have to learn your area and what you will get there in what price range. Cosmetic issues are no big deal if the area is nice. Would much rather own a run down to property to fix up in a nicer area then a jewel in a dumpy area then turn to a lump of coal real fast.
Property 1 seems mostly just to have poor tenants. Other then the leak and bathroom whole I didn't here a whole lot wrong structurally.
Property 2, the sagging floor would be a concern, fixing that could get costly. That being a said a 3 unit for 50K depending on the area might be worth the investment to fix those things.
When looking you need to look past the tenant issues, cleanliness, etc. That can be remedy with better screening. You need to look at structural things, foundation, roof, windows, etc. and high dollar capital expenses, hot water heaters, furnaces, appliances, etc. If you can remove the tenants do a deep clean and paint and have a nice sound unit your probably in good shape.
Unless you are specifically looking for turnkey properties (and plan on paying accordingly), you shouldn't get too hung up on the cosmetics. What matters is the value of the property, how much it will cost to bring it up to full potential, and the price you can get it for. Honestly, if a spider web in a window creeps you out, you are in for a lot of sleepless nights in REI :-)
Also, as Joel points out, the local market determines what you can expect in a $100k property. In some places a $100k will get you a shack, and in other places it can buy you a brand-new 2000sft house.
Very much so, the market determines what you can get for any range of price. In some markets you could get a 2-story house with a big yard for $100k while in LA, for example, $100k would barely buy you a bathroom. And then every less-extreme difference in between. Completely market-dependent.
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