If it cash flows, do comps matter?

18 Replies

I found a property, 1.75 acres, it has a log cabin based house built in 1848, and a 1993 mobile home.

The 63 yo owner lives in the mobile. Her now deceased parents used to live in the log cabin house.

The mobile is decent, will need a roof in 3-5 years. It should rent for $850.

The log house is, well, built in 1848 and it shows it. It needs major help or just scraped. But i think it could be rented with a new roof for maybe $750. That well below market, but it’s rough, like not level floors and big rough logs for walls.

Theres a separate 2 car garage with a concrete floor with drain the owner uses to detail boats. That should rent for $200. Fyi it’s so old the walls are oak slabs.

she is asking $150k, so it clearly meets the 1% rule, albeit with a lot of deferred maintenance. Newer nearby houses, and there’s a lot of them on much smaller lots are selling and renting much higher. But this has been on the market for over 1000 days. I don’t think anyone has thought about is a rental, even though there is a brand new duplex across the street. The hoa that surrounds this has boat docks and water front properties. Some selling north of $350k.

And heres the possible icing on the cake, one side is on a major road though this resort area, so that opens up possibly boat storage, retail, splitting it into building lots to sell or build rentals.

I’m just trying to get my head around buying a dumpy old house and a trailer for $150k. The numbers work, and I’m an engineer, just feels like I’m missing something. I think it’s that more than a 1000 days on the market, that’s rattling me.

@Joe Villeneuve - I’m looking at comps, but this place needs a ton of work which moves the price down.

However because it’s 1.75 acres, it could be split into 4-6 lots, which dirt alone brings about $25 k per lot. Don’t think I’d sell them, just build new as rentals. Not sure how much splitting costs would be.

Originally posted by @Steven Westlake :

@Joe Villeneuve - I’m looking at comps, but this place needs a ton of work which moves the price down.

However because it’s 1.75 acres, it could be split into 4-6 lots, which dirt alone brings about $25 k per lot. Don’t think I’d sell them, just build new as rentals. Not sure how much splitting costs would be.

 Find out what the costs to build and split are.  If bet it's a lot more than you think.

Don’t forget bringing in 4-6 sets of utilities, driveways, etc.  You might have 100k tied up in that depending on the distances. 

@Steven Westlake you mention that the log cabin needs lots of work or to be scrapped, but then says it can rent for $750...is that as is? Or are you accounting for the money that you will have to put into it.

I would also go to the local building department and ask them about the possibility of dividing the land and what that may cost you in fees/time. Also ask them if you would be allowed to build driveways out to that resort road.

Lastly you will also want to check building codes to see if boat storage or any of your other ideas would even be allowed.

The other thought I would consider if this is a resort area is Airbnb the log cabin.

@Steven Westlake everything that property needs is expensive. 1000 days on market is a LONG time for people to not see the value. Log cabins are a pain, and this sounds like not a good one to begin with. Probably not worth putting in a penny. The trailer is depreciating daily. It is probably worth the cost of the lot, minus demolition and disposal. Subdividing is also really expensive. Surveys, utilities, etc. Sounds like a loss every way you look at it. Even if you bought, rented put as is, time is ticking on both structures.

Thanks all.

I agree the total cost needs to be a known as part of my due diligence up front.

Fyi, 2 sets of utilities are already present, one for the mobile home and one for the log cabin. The cabin is black currently. Garage may be separate as well, need to confirm.

2 nd fyi, the owner mentioned she might be willing to “land contract”, which is Ohio’s equal to “contract for deed” in Texas. Terms yet to be negotiated. She wants to retire in Tennessee where she has relatives.

Yes i think the cabin could be rented as is, assuming the roof leaks get stopped. Albeit at far below market rates. My thinking is it could be rented while the rest is developed, which when combined with trailer and garage rent would more than cover the payments.

@Tim Delaney - airbnb, that would take some planing and local help, some one to clean, restock, etc. home for me is 1200 miles southwest in Houston Texas.

Will try to add pic below.

Turns out you can add pics from web page but not through the app. You’d think that would be the reverse.

@Steven Westlake first of all, never assume anything! Do your own checking - maybe codes have since changed and no new storage is allowed.

There are plenty of people that either remotely manage airbnb or that have management companies. It was just a thought.

Thanks for all the input. 

 I have decided to pass, at least at anywhere close to asking price. I think it would just eat a huge chunk of my time. 
it’s on the mls if anyone wants to check it out, maybe theres a higher and better use, than my brain can come up with, I would be open to partner up ideas, the address is 

11545 Parker Dr, Belle Center, OH 43310 


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