Investa-Brothel the Odyssey

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Investa-Brothel the Odyssey

Lee Fahy
Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes

My wife and I had been interested in purchasing a rental property for about a year with the intent of making this a business. She's a teacher, I'm an engineer and we have little faith in the future of Social Security / 401k stability. So bring on the house viewings! After many viewings we decided to look at a 'slightly' downtrodden 1954 ranch with the right square footage. 

Notice the fancy red-white-blue spray painted garage windows! Seems like we may have an artist on the premises (more on that). After viewing the place twice, researching the rent comps and recently sold comp values for the area we decided to purchase it.  Here is my wife after closing...inspecting her snazzy new $60,000 purchase (so much better than an escalade). 

And after she hears me laughing without control:

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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y

Your wife and I are kindred spirits.  If things don't work out between the two of you, please give her my number.  She and I would be a match made in heaven because clearly she knows what hell looks like.

Podcast Guest on Show #244
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  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    A tour of the property, a 5 bed, 2 bath, one stall located in central Minnesota. 

    Roof was ventilated when we took position and had developed an organic skylight (added features). 

    The living room had a palatable funk to it, most likely due to the 10 pounds of cat littler and what have you. 

    Every day when we left the property we smelled so badly of it we had to shower immediately upon arriving home, the car would smell like it for at least an hour after we got out. 

    4Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    Kitchen

    Laundry - entry way, SMILE. 

    When I purchase a house it's about the craftsmanship, the quality of build..... I give it a 7 for creativity. Haha.

    0Reply
  • Jeff Gersbach
    Fairburn, GA · Member since 2016 · 11 posts · 4 votes
    9y
    Hey Lee! Is this your first property? I am also an engineer, and I am about to marry an engineer in October! We both have the same thoughts as you. We are worried our desk jobs will not allow us to ever retire. We have been planning to start a real estate investing business for about a year now, and we have decided we are going to go full throttle after our wedding. Would you mind if I sent you a message? I would like to ask you a few questions about how you got started. It sounds like you and your wife are a bit further ahead than me and my fiancé. Thanks! Jeff
    2Reply
  • Dustin Lavender
    Investor · searcy, AR · Member since 2016 · 147 posts · 111 votes
    9y

    awesome is this to be a fix and flip or buy and hold?

    0Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    And now the artist quarters aka the basement............

    I don't even know here..... Skull game.... I'm sure thats fiiiiine. 

    I've got 99 problems but magenta....not one. It's EVERYWHERE. 

    5Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    Awesome! That is my kind of house for sure. Other than the 5 bedroom thing (how big is this house? doesn't look big enough to have 5 br), I love the setup and layout. 

    Podcast Guest on Show #243
    Skyline Properties
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    0Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    I mean we are just getting started here. There's a kitchen upstairs and downstairs, the downstairs one had been receiving Minnesota's finest summer of rain pouring through the perforated roof, upstairs Room 2, through the hardwoods and onto the counters. Lower kitchen, total loss. 

    So here comes Fred, the city water man. We turn on the water main and realize, hmm.... seems like the flow indicator is spinning like crazy AFTER I closed all the faucets.... AAAAND now the floor in the basement kitchen is FLOATING up. Enter sharkbite fittings, try to picture putting your finger in a single leak and watching three more pop up. That's how this went down.

    Four shark fittings later we have WATER! 

    2Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    @Jeff Gersbach you can sure shoot me an email, I'll do whatever I can to help! 

    0Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    @JD Martin; you are not the first person to say, "REALLY, five bedrooms in that house?" It's 2100 sqft and here's the layout of the upstairs:

    0Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    There's two fairly large rooms in the basement, one is the aforementioned "artist quarters" and the other is what I call "the pink room"........its a crazy pink...room. 

    0Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    So the kindly neighbor comes over, announces shes the head of the local Neighborhood Watch and starts telling me about the RAID and also how the home was a Bordello of sorts. 

    I start looking closer and realize all the frames in the upstairs doors have been shattered from the police "knock knock" tool. I mean every single one. Things are starting to add up here, I see mystery brownish stain on one wall in Room 1... I quickly point it out to my Roommate for Life and tell her "See kim....that's where they shot that guy!" (Eyes the size of saucers)....

    3Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    The city rental inspector called to try to fish out who had purchased the property and if they were going to be a slum lord. We quickly discover that her daughter went to school with my wife, and then she proceeds to tell me how the basement had been some sort of sex trade / flop house. She isn't 100% sure but I run with it and start to sell the idea to my darling that we have purchased a Brothel (and I refer to it as THE BROTHEL) and that she should be on the lookout for prior clientele and workers. 

    And the demo begins with removing the cat litter carpets. 

    1Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    I learned things like "carpet is a hazardous material" and cannot just be thrown in the trash but requires special city pickup. Cool, so I tear all of it out. It's so awful that I feel moist and filthy having just carried it to the curb, also I now have the unmistakable aura of cat pee and cigarette. THIS must be the feel of growing equity. 

    15Reply
  • Steve K.
    Denver, CO · Member since 2017 · 265 posts · 234 votes
    9y

    @Lee Fahy ,

    Lee and Kim, improving the neighborhood, one property at a time. The neighbors ought to hug you and buy you fruit baskets and such!

    Does Minnesota have a stigmatized property law? (Do you have to disclose homicide or brothel to future Buyers (or renters?)

    Good luck. Twelve coats of Kilz primer ought to cover that art.

    4Reply
  • Account Closed
    Investor · Denver, CO · Member since 2016 · 736 posts · 582 votes
    9y

    LOL - A little bit of paint, a little bit of minor plumbing.  A little drywall here and there, a new roof and some flooring, you'll be good to go.

    Seriously - it doesn't look too bad.  Looks like a great start.

    0Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    We rip the awful upstairs kitchen out because the cabinets (well made but not salvageable) had to go. The floor had about six layers of linoleum stacked on top of each other. The wall in between the living room and the kitchen had to go as well. 

    The light fixtures had been painted with white supremacist symbols, my wife was so kind as to google search until she figured out that little nugget. "LEE, they must mean SOMETHING".  

    1Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    @Steve K. I don't think they do or we would certainly have been notified. I also don't believe they actually shot somebody but I do KNOW they had people scattering out the windows because all of the frames were kicked out. 

    @Account Closed LOL, strictly cosmetic work here.....

    1Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    Just an FYI we are actually finished with the upstairs:

    (this is the kitchen in progress)

    Stain was still a work in progress here:

    We are getting WAY WAY ahead of ourselves here. 

    2Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    Just so we are clear, this was purchased in July 2016 and here's a short list of things:

    - cat litter carpet

    - cigarettes everywhere

    - Graffiti everywhere

    - burst pipes in the basement

    - hole in the roof

    - hole in the ceiling of room 2

    - lower kitchen total loss

    - furnace discovered to be unreliable at best.... in december

    - vinyl siding eaten by the unattended dog

    - bathroom (upstairs) subfloor totally shot

    - laundry room discovered to be fully uninsulated but hey, who needs insulation in Minnesota winters and those supply pipes will probably be fine (discovered this in December)

    1Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    When I was a child I would jump into the deep end of the pool and as I sank I felt the fear of drowning.... this undertaking had that similar feeling. You can either drown, or swim like a son of a ***** for the surface. 

    6Reply
  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    Sounds like you might have bought into an ongoing business. Did you have to pay a premium for the value of the business?

    6Reply
  • Lee Fahy
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 161 posts · 221 votes
    9y

    @Account Closed what are the taxable benefits of this business i wonder? hahaha

    3Reply
  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    Great post.  Fun presentation.  Thanks

    1Reply
  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    I think there would be significant inventory depreciation. Lol. You seem like the risk taking type. Tell the wife that you are considering reopening the business and ask if she would be an owner/operator! Lol

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y

    So, when do / did you go over budget and by how much?

    What will your position in the property be when the rehab is done? Under market? Break-even? Under water?

    0Reply
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