$5,500.00 REO Purchasing in Atlanta, Georgia from California

$5,500.00 REO Purchasing in Atlanta, Georgia from California

Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes

Hello Everyone,

First I'd like to say thanks for taking the time to read and hopefully answer the question that I have.

I live in Southern California and although I've been in the real estate field for 8 years, the only purchase I've made is my primary residence. I finally got up the courage to look into investing about a year and a half ago and of course I wanted to start low which meant purchasing out of town. I placed a bid on a HUD home in Atlanta, Georgia which is a 3 bedroom 2 bath the cost a whopping $5,500.00 . A friend of mines lives in Georgia and her and her husband were nice enough to go by the place. Just as I figured it has been completed gutted and bascially has the frame, roof, bar doors and some windows. I planned on rehabbing the place over a course of a year or shorter and either renting, lease to own, or eventually selling.. The problem is I have no idea what a rehab would cost or if it's even worth it to get involved with a home with nothing in it literally. The agent has given my friend the access code to go in the home and the zillow estimate is $105,700 while the assessor market value indicates $122,100 (I'm sure that's estimated on the home being livable.. Lol.. Any experience or answers would be most appreciated.. Thank you all :)

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Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes

Bridget,

The area that house is in is called Pittsburgh. Not too many years ago, it was named the most dangerous subdivision in the country. Cops avoid it. When I get a call from a person who wants to see a house in there, I either tell them "Flat out no" or I bring both the pistol and the shotgun.

The high sale in the past 6 months in that neighborhood was $53,000 for a 2004 built house. Like any other house that is left un-attended for more than 5 minutes in that SD, I'm sure the new owner had to replace everything that was made of metal and most likely had to replace the carpet to get rid of the meth-burns.

If you choose to buy this house, you need to renovate it to section 8 standards only... and no more. Get an asset manager who is tough as nails and hangs out in biker bars and has no problem tossing out clients who brew meth in the bath-tub and who think that turning tricks on the weekend is a good occupation.

Listing agents who are experienced know better than to put "Pittsburgh" as the subdivision in the listing... it's too easy to google and thus an easy way to lose prospective buyers.

There are houses on the market for over $100k, but they aren't moving and have probably been relieved of anything made of metal since 5 minutes after the renovation crew left. They're probably now inhabited by a meth brewer who thinks that turning tricks is good weekend entertainment.

Now, if you really enjoy headaches and like replacing windows and HVAC line-sets every week, please... buy this house and rent it out.

Otherwise, drop the contract like a load of flaming napalm bricks and find yourself someplace that will attract a tenant that won't brew meth in the bath tubs.

Example: There's some flaming hot deals in 30032 and 30034 zip codes right now for landlords who are going to hang on to the property for a few years.

See this reply in the discussion

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Michael R.
Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
15y
Not to be negative but you should have gotten estimates before you bid. Never buy something just because it is cheap. I have passed up 1k houses because with rehab costs factored in it is a dealbreaker. In your case it could be a deal but I really dont know. What if houses are only selling for 20k in this area and you need a 10k rehab? I would never go off zillow or assor comps. You need the advice of someone on the ground who knows what it will sell for. Also I would not rehab it over a year, I would save my money and bang it out quick this way you can sell or rent to avoid and more vandalism.
3 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Thanks alot for your reply Michael R., I didn't take the zestimates literally as I indicated I'm in real estate and I know alot of things aren't what they seem. The bank accepted the offer and is giving 5 days from tomorrow for me to have the earnest money deposit to their attorney. I plan to have a contractor give me an estimate by then. Great idea on the rehabbing, I hadn't thought of that.. 1st timer in trying to invest :) .
0 Reply
Mike G.
Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
15y
My first thought is before you put any money into rehabbing the house, you should find out from a couple of local RE agents or an appraiser what the value of the home would be if it's fixed up. Then with the contractor's estimate you can determine if it's worth your time and money to fix it, or if instead you should just try to sell it to someone else now. Oh, and you're going to want to get estimates from a few contractors, preferably ones who've been referred to you.

Also, I think many investors would suggest that you decide on your plan for the property now before you put more money into it. Do you want to rent it, lease to own, or flip it? There is a lot of great advice to be found here on BiggerPockets for each path - just do a search for whatever you're interested in if you haven't already.

And I agree with Michael - I don't see any benefit to taking a year to fix the place up. If the numbers make sense after you get the info on the house and you decide to go through with the rehab, just do it as quickly as you can and then proceed with the next phase (rent or resell).

Good luck!
3 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
15y
Bridget I would try to get out of that contract quick.

If it's the area I am thinking of it is a war zone.I looked in the city of Atlanta for awhile.Mostly old homes with high taxes in horrible areas.Some of the streets are called "gun alley drive" - not joking.When I drove these areas during the day I had a few people in the car and locked the doors,didn't slow down,and didn't exit the vehicle.

It's pretty bad when you see police avoid driving in certain areas.Not saying this is where your property is at but I would be shocked if it was in a good area.These properties even with rehabbing the exterior mechanicals will be stolen again within the week.

A key is how many homes are vacant on that street and is the area transitioning down or up in its cycle as far as crime and revitalization.

I don't like the older homes in Atlanta.They sit on small lots so the land is not valuable.They have very high taxes with some at 3,000 or more a year based on inflated assesments from years ago.The properties are also very old in age.

Many of these properties had lipstick put on them for flips years ago for fraud.Now with these old properties you will be eaten alive in costs with possible lead paint,galvanized pipes,asbestos,foundation issues,radon,mold,etc.,etc.

The cost of the taxes alone if you lose a tenant in one year will put you in a minus cash flow position.What many do is buy outside the war zone outside of the city limits where taxes are about 60% less and the areas are B to C instead of D to F.

Less risk and more cash flow and upside.It would help if we knew the address of this property to know the area.

I can find in MLS hundreds of homes in Atlanta for your price and I would buy hardly any of them because of location. Apartment building is different because I can hire security and have a manager on site.
Thanks
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2 Reply
Aaron McGinnis
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
15y
Bridget,

I know Atlanta pretty darn well. If you'd like, drop me a message with the address and I'll give you my quick opinion of it.
1 Reply
Chris Sweeney
Real Estate Investor · Austin, TX · Member since 2011 · 271 posts · 106 votes
15y
I'm with Joel on this one and you have a ton of homework to do in 5 days to make an educated decision. I think Joel's comments speak volumes to knowing the area you are investing in. I know So Cal is pricey but what if you find something in So Cal at 60% ARV and can do a hard money loan refi'd into conventional with little to no money of pocket?? Could be a nice revenue stream for a buy and hold rental. I'd take Aaron up on the offer of checking it out but for me I'd run like the wind away from this deal.
1 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Chris, Aaron, and Joel.. Thank you all for your information and suggestions. The address is 299 Fletcher Street SW, Atlanta, GA 30315, the property taxes are $1642.69 for Atlanta and another $514.33 for Fulton County. This is way more than I imagined to take in. I'm planning to finish my investigations in the next 2 days (hopefully).
0 Reply
Aaron McGinnis
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
15y
Bridget,

The area that house is in is called Pittsburgh. Not too many years ago, it was named the most dangerous subdivision in the country. Cops avoid it. When I get a call from a person who wants to see a house in there, I either tell them "Flat out no" or I bring both the pistol and the shotgun.

The high sale in the past 6 months in that neighborhood was $53,000 for a 2004 built house. Like any other house that is left un-attended for more than 5 minutes in that SD, I'm sure the new owner had to replace everything that was made of metal and most likely had to replace the carpet to get rid of the meth-burns.

If you choose to buy this house, you need to renovate it to section 8 standards only... and no more. Get an asset manager who is tough as nails and hangs out in biker bars and has no problem tossing out clients who brew meth in the bath-tub and who think that turning tricks on the weekend is a good occupation.

Listing agents who are experienced know better than to put "Pittsburgh" as the subdivision in the listing... it's too easy to google and thus an easy way to lose prospective buyers.

There are houses on the market for over $100k, but they aren't moving and have probably been relieved of anything made of metal since 5 minutes after the renovation crew left. They're probably now inhabited by a meth brewer who thinks that turning tricks is good weekend entertainment.

Now, if you really enjoy headaches and like replacing windows and HVAC line-sets every week, please... buy this house and rent it out.

Otherwise, drop the contract like a load of flaming napalm bricks and find yourself someplace that will attract a tenant that won't brew meth in the bath tubs.

Example: There's some flaming hot deals in 30032 and 30034 zip codes right now for landlords who are going to hang on to the property for a few years.
5 Reply
Eduardo A.
Sandy Springs, GA · Member since 2011 · 126 posts · 31 votes
15y
Thats the hood, I would definitely leave that alone.
0 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Aaron thanks for the insight and your honesty, it was hilarious also... Lol
0 Reply
J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
15y
Bridget -

That's actually a great area to own rentals.

Aaron is just telling you all that bad stuff because he wants you to drop the contract so he can pick up the house and make a fortune off of it!!!

Just kidding... :D
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0 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Ok gang thanks for ALL of the information.. So my friend and her hubby were able to gain access to the house and she said it's basically A TENT... All it has is the shell, she says everything is gone including the floors (literally the floor is part of the foundation) and how the hell and why would one take the electrical box?? Odd.. Oh and btw, I contacted about 10 appraisers that wouldn't go to the area... Lol, I think I will try the 30332 and 30334 and see what I find.
0 Reply
Steve L.
Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes
15y
Why not buy in California?
0 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Originally posted by Steve L.:
Why not buy in California?

Hi Steve,

There are no homes in the price range I'm looking to start investing in California that I know of.. I'm trying to start with 5k to 20k maximum.. I wish
0 Reply
Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
Originally posted by Bridget D.:
... how the hell and why would one take the electrical box?? Odd..
...

Not so odd. Once the electricity is turned off outside the house, all those wires in the electrical panel are no longer live - but they are still copper. The electrical box itself is metal, and has some (minuscule) value as scrap metal. Same goes for copper pipes and HVAC units.
2 Reply
Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Bridget, buy a plane ticket, fly to GA and spend a weekend, or a week, driving around and get to know these areas. If you're unwilling to do that, you have no business buying there.
5 Reply
Aaron McGinnis
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
15y
With 20k to spend you might be able to pick up a 10k house in Decatur, get it marginally rent-ready for the other 10k, and rent it for maybe $600/mo.
1 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Originally posted by Aaron McGinnis:
With 20k to spend you might be able to pick up a 10k house in Decatur, get it marginally rent-ready for the other 10k, and rent it for maybe $600/mo.

Hey Aaron, I searched the zip codes you stated on realtor.com and trulia.com but nothing came up that I saw. You have any suggestions on websites to look at?? Thanks for your help, you're awesome
0 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
15y
Just searched one of my mls's.

Detached houses in those zip codes came up with 79 priced 30,000 and below.

Most built from the 1950's to the 1980's.Product mix from 3/1's to 3/2's to 4/2's.
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0 Reply
Aaron McGinnis
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
15y
Bridget,

Realtor.com and Trulia will be worthless. Inventory like that, in those areas, moves in a matter of days... if not hours. By the time it gets to Trulia or Realtor.com, the data is beyond worthless.

You need to hook up with someone who can pull info straight off the MLS for you.
1 Reply
Bridget D.
OP
Involved In Real Estate · Westchester, CA · Member since 2010 · 56 posts · 3 votes
15y
Thanks Joel :D

Originally posted by Joel Owens:
Just searched one of my mls's.
Detached houses in those zip codes came up with 79 priced 30,000 and below.

Most built from the 1950's to the 1980's.Product mix from 3/1's to 3/2's to 4/2's.

0 Reply
Chris Sweeney
Real Estate Investor · Austin, TX · Member since 2011 · 271 posts · 106 votes
15y
Until you are off to Georgia to check it out put your feelers out for Subject To or Owner Finance deals in So Cal. Maybe network with some investors at a local REIA. If nothing else you will learn a bunch.
1 Reply

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