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Adam Giles
  • Rental Property Investor
  • Flagstaff AZ
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Complete Demo Experiences? New Deal may require it.

Adam Giles
  • Rental Property Investor
  • Flagstaff AZ
Posted Jun 20 2018, 12:41

I think like many of you, I like to have a secondary “out” when closing a deal whenever possible. We are in the process of closing a cash deal for a property with a bit of a unique secondary out. Here are the basics of the deal:

  • Buyers are asking $59,000
  • ARV is ~$100,000
  • Repair estimate is just shy of $25,000
  • We settled on a cash offer at $40,000

The buyer is gun shy and does not want to deal with counters after inspections etc. They want an as-is deal. I agreed to a “not subject to inspections – excluding termite” clause to get the deal done. I know the other players in town are looking at the property. I would not normally do this, however here is where the deal gets unique. Blocks in this neighborhood are comprised by 12 48ft by 120ft lots in a 6x2 formation. So 6 48ft wide lots make the width of the north half of a block, and another 6 make the south. This property sits on the three lots adjacent to the three lots on which an 8-plex we already own sits. The long term strategy (5-10 years) will be to tear down this home and build an identical structure to our existing 8-plex, making a 16 unit complex. We would secure the entire north side of this block. The three lots alone are worth $45,000.

I am very comfortable with this deal for obvious reasons. We would love to be able to rent a 3br home on a triple corner lot for the next 10 years while we wait to build. The ROI would be such that we would make money on the rehab as long as it stays within budget. However, even if we get into the nuts and bolts of the rehab and find the budget is too high, we simply raze the home and our existing tenants have a large yard for the next 7-10 years. We would likely secure capital to build sooner than that in the second scenario. Ultimately the land is what we want.

The part of this deal that is unusual for me is potentially tearing the home down. Have any of you done a complete demo of a 3000 sq ft, two story home? Any unexpected expenses? Fully understanding it can fluctuate, I would love to hear expenses ranges for folks who have had this done. I have bid requests out to contractors we work with, however I would love to hear some personal experiences.