I buy houses as-is but what do I do with tear-downs?

15 Replies

Hello all! I would like to know just how you guys handle 'tear-down' leads if you know that you don't already have an investor that will buy them from you on your buyers-list? My marketing states that I buy houses as is and I want to make sure that I do just that. 

Thanks

Reg. JR.


If it's not worth anything it's not worth anything.

I'm interested in tear-down opportunities in Atlanta, but I would gauge the profitability of the deal first. If the ARV isn't worth the time or money to build out, then move on.

Understand what lots are going for and pay market value. Then go out and find infill developers and home builders that work in the area that can pay top dollar for the land.

Thanks guys. Neal are you saying make an offer on the lot and not the house?

If you are buying a tear down you make an offer on the price of the land minus costs to tear the house down. Now you have land value ;)

Adding to the comment from Elizabeth, you should also deduct for expenses that are now required by zoning.  For example, older homes may be on septic systems but towns that have installed sewer systems since the house was build may require the property to connect to town water/sewer upon sale of the property.  

If your tear down is near wetlands (not necessarily on the water but near areas that flood in spring) you will have to submit plans to the local natures conservation committee for approvals and likely install wetland protection barriers/fencing and limit construction options.  

All translate to extra costs to rebuild/resell.  And since these are "invisible" improvements, the next buyer is unlikely to pay extra for them so you are better to get your prospective seller to absorb some of it now by reducing your offering price.

Reg, it seems like you've got a great response to your original post. There is a lot of quality information on various things that need to be on your radar (very much like a lawyer going over everything that potentially could go wrong), but at the end of the day, it shouldn't be too difficult to figure out what similar sized vacant lots are going for in the area.

Unless you want to go in and file permits for demolition and deal with that headache, I would stick to the lot price and find the developers that specialize in building on that kind of space. They will be your top dollar buyers just because they have done it so
Many times.

@Reginald S.  You're worried about something that MIGHT not ever happen! It more than likely will but it hasn't yet and I understand you're worries but fugetaboutit! Get your marketing out there and make some cash! 

Copy and paste this thread and save it in a folder. Then if you do come across this scenario you have some very good info on where to go. In the mean time make that phone ring!

Wow great information guys! However I'm a wholesaler so I think Neal and Elizabeth's reply has giving me precisely what I was looking for. Thanks agian all for the great information!

I'm a wholesaler as well. I've come across this exact situation. Good luck!

I'm doing deals Nathan, sorry for misleading you guy however I'm not sure what I said that gave you the impression that my phone wasn't ringing (although I do wish it would ring a little more often though). I just started my company in June of this year and I have been primarily marketing to absentee owners via direct mail. I have been successful at avoiding the tear-down properties thus far however I received a call yesterday from a guy who needs to unload about 30 houses that he inherited from his dad who acquired them (over the years) via tax-lien auctions. We agreed to work them down six houses at time however the first two of the six that I checked out was halfway standing and the neighboring houses that was actually occupied looked like they shouldn't have been. My concern is that if I don't make this guy an offer on these houses as they are, he may just find someone else to work with who actually practice what they preach which is, "We buy houses as-is." In closing, I perceive that there just may be a gem hidden in this bunch.

Sounds like a dynamite opportunity. I'd really be interested in hearing how the deal comes together. I would work this deal from every angle possible, even if it's outside the traditional wholesale business model. Even with a couple tear downs in the mix, you have a huge potential in front of you. Good luck!

@Reginald S.  I wasn't trying to be critical by any means! I was unaware that you had already had contact with a seller and had been to the property from your original post. The way I see it is, yes you buy as-is but you don't HAVE to buy every property you come in contact with. 

Example: my investors only have so much cash to buy with and its gonna cost a fortune to get this property up to code it's not worth the risk to my investors to give you what you're asking. They could easily buy something move in ready...

Sometimes the ones you walk away from have the best outcomes.

I applaud you for jumping into the RE world most don't get as far as you have. I would add though, to be a good wholesaler you cannot buy hi. Do not be scared to offer extremely low based upon the situation. Remember you can always go up in your offer but you can never go down on your offer once you give your price.

With that said, give it your best shot the worst he could say is no and you move onto the next house. 

Good luck

Thanks Nathan. 

Thanks Neal. I'll keep you guys posted...

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