I am fairly new to real estate investing. Have 2 rentals that I lived in and rented after moving out of. Currently, the process of selling 1 to invest in my first multi-unit. My brother did the same and moved out of state and did not hire a management company. His tenant had great feedback besides paying rent late. That’s not the problem though.
I am also a Real Estate Agent and going to put my brother's SFH on the market. Knowing there were issues with the property, I went on a walk-thru last night. First, the issue with the property is there has been 3 water floods in the basement which is fixable. But as soon as stepped in the home, house was trashed! The tenants dogs never had their paws wiped off from getting walked, carpet is ruined, and baseboards were chewed up. The whole house will need to get re-painted, new carpets and minor fixes throughout the home. This is on top of the the basement getting fixed.
My brother has no extra money to fix everything. Yes, he will not give back the security deposit but that will only cover so much. I will not be able to list it for top dollar like he wants. Not sure if he can even break even at this point..... Real Estate is too stressful for him and wants to get it off his hands ASAP!
@Sofia Slater , that is a bad place to be! I feel for you and your brother. You can of course always take the tenants to court. But, besides, the stress of a lawsuit, if you win it, you will face the burden of having the judgement enforced. If those people don't have money, it's very unlikely that you will ever see the green stuff to make the repairs. It is obvious that they don't care, even about themselves (who wants to live in a trashed house but people who have no pride?). If it were me, I would get them out of there asap and with asap, I mean like yesterday. Stop the loss. I don't know the numbers, but it looks like your brother is going to have to lick his wounds and move on. I'm sorry for that... but it shows once again that paying a good property manager and setting the right expectations from the get go are no waste of time nor money.
Work out an owner finance deal with him after getting the tenants out. Get it at an awesome price, renovate it and then rent/cashout or sell. Carpet and trim-out doesn't seem like a huge deal, not sure about the basement flooding. Should be easy profit for you.
Hi @Sofia Slater ,
We are in a seller’s market, so I’ll try to fix the property and list it. The repairs don’t seem that bad, they are mostly cosmetic, except for the basement. Waterproofing a basement should cost you somewhere around $2,500-$3,000. Re-painting a house, new carpet, and other minor fixes shouldn’t be more than another $3,000. Throw another $1,000 for miscellaneous things and to be in a worst case scenario.
If putting $7,000 to fix these things brings you a lot more when selling it retail, do it. If he has no money, apply for a credit card with 0% interest for X months. Pay for the repairs with this credit card. List the house and sell it. Don’t forget to use part of the proceeds from the sale to pay the credit card!!
If putting $6-$7k is not worth it. Clean the house the best you can, and auction it with a reserve price equal to your debt. But if you can’t make it work selling it retail putting $6-$7k in repairs, it may not sale at auction either for the price you want.
Finally, you can try to reach out to flippers and investors in your area to see how much you can get quickly. This option won’t bring you top dollar, but you will get rid out of the problem without doing any effort. If their offers coverage your debt, it may be the easiest route.
This situation is typical of a investor that takes no interest in managing their investment. I would tell it to him like it is and suggest that if he is not prepared to take your advice and list where you believe it will sell that it would be best for you and him to not work together.
He needs to hear the truth, you need to separate yourself from family. Tough love.
Thanks for everyone’s advise. Lots of ideas I never thought of as a newer investor. @Justin Fox I like the owner finance deal. Please explain more or message me. Applying for a 0% credit card to fix is also a great option. Selling as-is is a great way to sell for my brother. If I plan to do the owner finance deal, of course it will not be a partnered relationship.
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