Bankrupt Builder & Cheap Townhouse - What to do?

2 Replies

Hey guys, need some input on an interesting property.  Here's the nitty gritty:

3/2.5 Townhouse

$70k List

$60k Market Value

Approx $18k Reno

$125K ARV

(Side note, sold in 2009 for $142K, sold at foreclosure auctions 4 months ago for $135k, I've been told it appraised, as is, for $111k. Some may ask why only $125k ARV, I'm pretty knew at this so I'm simply going off of what my realtor is telling me based on his knowledge of the market.)

Plan would be to refi cash out and rent, clearing $240 monthly cash flow and approx $18k cash in hand.

Here's the problem, the builder went bankrupt 3 years ago after building only 2 of the 16 slotted buildings.  The grounds are falling into disarray, trash is building up around the property and it's getting worse every minute.  Best case scenario in my head is somebody buys the community, builds it up and we all live happily ever after on appreciation.  Worse case scenario, nobody buys it, the two buildings go to complete crap and I can't rent or sell it.  

Anyone have any experience with bankrupt builders and how these things usually go?  Any input/insight is greatly appreciated.

Thanks!

I have seen deals like this go both ways so you have to be fairly intuitive or investigative about what's to happen in the area. Does it require what I call "Trailblazer Builders" - is this the ONLY project of it's kind in the area, if so, pass on the deal. If there are other developments in the area or close, then you may have something. 

I most likely wouldn't do this deal because for the potential risk you are taking on you could find other deals more suitable, especially if you buying off the MLS.

Thanks for the response Tyron, I actually had moved on due to it being taken off the market after receiving an above list offer.  However, I was just notified it came back on today.  It is the only one of its kind in the area (however about 3 minutes away there are a bunch of townhouses and apartments, just not next door) but what makes it really enticing is it is a 2 minute drive to the main gate of a military base, it's the ideal rental, most of the other occupants in the buildings are military. 

The HOA is also a huge mess, it's not in good standing with the state, the president is most likely pocketing the money, he basically has no idea how to run an HOA.

So having said all that and the fact that it's back on the market, I am extremely intrigued by this property... 

Anyone else have any input?

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