Hello BP community, I have a question for my Chicago area wholesalers out there or wholesalers in any market that may have experienced this issue. Im working on a wholesale deal in the Roseland neighborhood, for those unfamiliar its a community on the south side that most would consider troubled. So the owner is a family friend, the ARV on the property is about $115k it needs about 60K of rehab. She owes approx 4k in back taxes but just wants to be rid of it so accepted a contract amount of 4.5k. Comps in similar condition in the area are being purchased by cash buyers from anywhere between 10-13k so I figured the numbers would work but now i keep being presented with more and more issues with this property. First issue was she informed me that since her property has been vacant (Approx 2010) that she has continued to be billed by the city's water dept. So trying to help her out I called the water dept to get the past due balance and they informed me it was $6,058 WHOA! So the agent on the phone informed me that her property is not on a meter and the bill is and estimate sent out every six months. So i asked her how she could possibly have the bill waived since no one has been using water at the property because its been vacant for 7 years. She informed me that in order to get the water billed waived she has to register her building as a vacant and back date it to 2010. So im like cool I'll help her out even more and see about registering the property as a vacant! Bad move, so apparently Chicago has a vacant building registration ordinance which is very costly, about $1,000 per year to be exact and if you fail to register as the owner they tact on an additional $1,000 failure to register violation. So long story short I tried to help this woman out and register her property with the building dept as a vacant not fully understanding the fee structure and they disclosed a balance due amount on her property of 13K. Holy crap!!! Has anyone ever experienced this issue and have any idea on how I can still make this deal work, or should I just abandon ship and walk away from it? Thanks
@Daniel Johnson so what we did in the past in almost an exact same scenario was Contact the tax lien buyer and contract with him to buy the property back once he gets a tax lien deed. It might be 3-12 months out but that process should wipe out the vacant building registry. You can enter into a contract to buy now even if he hasn't gone fully thru the process. Tax Lien buyers like it because they have an exit strategy mapped out.
Consult with an attorney.
That is insidiously clever.
@Mark Ainley I'm not aware of this property being sold in a tax sale. The owner has never indicated such nor is there any evidence of a tax lien deed being recorded with the county. Treasurer reports show only 2015 and 2016 taxes are currently owed. However even if this is the case the leg work and process seems pretty lengthy and I'm sure I won't be able to get the property under contract at the same amount with the tax lien buyer.
@Daniel Johnson they typically get sold June the following year they were due so it might be too early for that option. Our deal was about 18 months into the sale.
@Mark Ainley thanks for the insight man I never even considered this option. I will look in to it but sounds like this deal is gonna be a bust!
Originally posted by @Daniel Johnson :
should I just abandon ship and walk away from it?
The answer to the question on whether or not you should abandon or walk away lies in the numbers for the deal & who you'll be marketing the deal to. W/ an ARV of $115K minus $60K rehab minus $13K balance due to the city minus your wholesale fee plus what your seller wants minus closing costs..... there's not much room for profit if you're marketing to flippers. You may be able to market the property to buy and hold clients but will they be able to cash flow a property that they have put $100K into in Roseland.
@Crystal Smith yes you are 100% correct the numbers with the fines and past due taxes pretty much eliminate any room for profit wholesaling this thing. Cash buyers in the area are not paying more than around 13k for comps. Maybe if I can get the seller to settle the water bill the city for say half (3k) it will work but I'm sure she doesn't have that type of money lying around.
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