Residential Real Estate Broker · Fort Wayne, IN · Member since 2014 · 171 posts · 116 votes
It was like walking though a time capsule only with mold and piles of what might be trash or could be treasure. This home has not been lived in since 1985 and the owner wants $5k to walk away. I have good reason to believe the owner will take less but I am not sure what price I can justify for the risk.
3 Bed 1 Bath SFH 1,536 sq ft. ARV is difficult to calculate in this area but it will make a strong rental at $630 per month +/- 12%. Assessed value (is wrong) at $45,000 and taxes are $1,110 per year (I can get them lowered but it would take 12 to 18 months from the time of closing to go into effect)
Title is clean however there is a code violation for $350 against the property.
The home will need foundation work
new plumbing
a new furnace
new water heater
new insulation
massive cosmetics
I am worried about the water line coming into the house and the swer line going out of the house since it has been vacant for nearly 30 years and what surprises might be buried. On a positive note the house went to tax sale a few years ago and received a bid of $24,000 however the bidder redeemed the taxes to keep the overage... Great news for the owner.... However I am sure they would have preferred the cash rather than the $3k of taxes paid by someone else.
First off, great idea with the video! Way to go. Did you use your phone to take the video?
Secondly, do you think the assessed value is over or under valued? If over valued, then you should probably walk away from the deal. Meaning, your rehab cost is going to be $45,000 at a minimum just by the looks of it. You didn't mention rewiring the house in your post but I think you saw that there was fuse box and will likely have active knob and tube throughout. It is difficult for a home owner (at least in my area) to get a mortgage with active knob and tube wiring. Rewiring the house is hefty - I'm about to do a house that is 3,000 SF and will cost about $10,000 to rewire it.
The only thing I can think of to make this a deal might be to level the property and put in pre-fab home like a 1,500 SF rancher. Can you find ranchers in the area?
@George Sarianos the house is in a good rental area however flipping the property is not the ideal exit strategy. On my way to the home there were several "auction" signs which I see as an indication that buyers in this area are primarily cash investors at rock bottom prices and not owner occupants. The exit strategies I could see for the home would be a
1. wholesale flip to my local REI once the trash is removed and the foundation is fixed (I don't like the margin),
2. long term hold as a rental at $630 a month
3. Fix the foundation, button up the outside and let it go to tax sale in 2 years and gamble on the overage. Cost would be minimal and the return would not be calculable however considering it sold for $24,000 before that could be the highest return on investment if the price dropped to $1,000.
The video was shot with a Sony Action Cam... $250, it lets me review properties once I am away, does great in low light and has great audio so taking notes on location is a breeze.
Oh man you are brave. I have a very very serious spider phobia. Not the best in this industry I must admit. I don't mind seeing them. But I mind them on me or walking through a web. We walked through a boarded up home a few weeks back that we literally had to hack through webs/egg sacks like a jungle forest. It took everything in me to keep calm.... and it was at night with a flashlight....
Interesting, thanks for posting. As the previous poster asked what is the land value? The land value and demo costs might decide it. Windows ok? roof? exterior siding looked alright so once you get the trash out you would get an idea of what it is going to take to rehab the "cosmetics" as well as the items you already listed. If you are not flipping you are not going to need to go all out. Its going to come out to if the house is worth salvaging or putting something else on the lot would be better. We did something not this bad last year but it was neglected. Because we weren't doing a gut some of wiring we put on the wall in wire mold and the tenants are good with it. The kitchen ate some budget though.
@Nicholas Miller"The video was shot with a Sony Action Cam... $250, it lets me review properties once I am away, does great in low light and has great audio so taking notes on location is a breeze."
I wouldn't quit my day job for a Video career if I were you, unless you include Dramamine.
Sorry I missed your point - This video will discourage any and all potential Buyers and Lenders from getting involved. Also convince the Owner to lower the $5k expectation!
Tell them you'll pay the closing costs if they give it to you.. You are going to have 2-3k just clearing it out to see what you have. Clear it out and then see if you can sell it off, or work on it.. That much trash you are going to have a lot of rot in the floors, walls, etc. Not to mention the rodent problems.
There's better deals for your money. I work in Indy, and I see 5-10k properties in MUCH better condition than this one all the time. Make it worth your while if you REALLY want to tackle it.
Awesome video. It looks worse than that house we saw @Lee Smith ! I'll have to do a video of the house I'm hoping to get. Minus the piles of crap, it's pretty rough, and since it's in Denver it's costing me over $200k.
You could hire 4 people, 2 upstairs throwing trash out the windows, small items could be bagged. 2 people on the ground picking it up and throwing it in a dumpster. That way you do not have to carry It through the house.
I see lots of ceiling damage which means a bad roof. You obviously look at it hard so you know that it's hard to salvage a structure that has had roof leaks. That rots the structure from the top down. Like drilling a hole straight through the structure.
@Nicholas Miller That house had a twin in the Carroll Park section of Philly about a year ago, except upstairs had no walls dividing the rooms just endless trash and garbage nearly to the ceiling in every speck of the house, just like this one. I'm not sure how long it was like that but it was a bank-owned property. That's sure to keep you busy until spring '15. Looking foward to see the post rehab walk-thru.
@Nicholas Miller unless you have a ton of spare time and are looking for a "project", I'd pass on this one.
$630 rent makes the value only worth ~$30k rent ready. As mentioned above, you will spend at least that to get it rent ready.
You will probably drop at least $7k-$10k to clean it out and fix the foundation. Even getting it free would still make it a skinny wholesale deal as well.
There is so much stuff in there I don't thing the video is that useful (to us, you were there). Depending on the condition of the systems Plumbing HVAC, elec., and the level of cosmetics expected in the area it could be an OK deal for a rental.
In my area the play would be buy it for $2K and auction it off for $5k
This is pretty typical of what properties I take in tax sale look like. In my area the copper would all be gone both plumbing and elec. to that adds a lot to the expense.
Truth be told I already have a buyer for the place... actually I have two investors interested in it. I will keep you posted with the progress if I can get my guys the contract.
I got a call a few days ago about a house close to a couple of my rentals. The realtor said the grandma moved to a nursing home a couple of years ago and then passed on. The daughter did not want to mess with it. They said it had an issue in that the small 30x25 2 bedroom house had the center of the house sunk about 4or 5 inches. A noticeable slope in the floors. I drove by and it looked decent - vinyl siding, old roof. Needs the trees trimmed. I got a key and indeed the floors have some, a good amount of slope. I offered $2500 cash. They called back in an hour or so and said ok.
Wow. It will take some to level the floors, paint the walls, and it will be rentable. This house will pay for itself in a year or two of rents.