How to use community support for renovating a blighted property?

Question

Hello BP community,I've come across a situation, and I'd love any advice or ideas on how to handle it...

I'm looking at purchasing a blighted property, completely run down, attracts bad elements etc. This property has been a problem in the neighborhood for many, many years.

The seller is willing to sell it to me, but wants a price that's (IMO) too high for the very poor condition.

Yet.... multiple neighbors and members of the community have approached me, telling me how much they hope I buy it and fix it up, and how much it would mean to the whole neighborhood.

So, I'm wondering if there's any way to use that community support to my advantage in this deal.

I'm a pure buy-and-hold investor, so I have to get the numbers to work so that (purchase + renovation costs) less than ARV. And I'm having trouble getting the seller down low enough.... but maybe the community can help in some way? (This is in the state of Colorado, if that helps.)

Any ideas are appreciated!

Sam Dangremond · Answer

Thank you all for your replies! Lots of good ideas!Let's see... yes, this is purely a business for me.  So I'm not willing to get charitable, the number HAVE to work for me or I'm just not doing this deal.I think you're right @Bill S. that they just have to transfer some money to me, in order to reduce my bottom line.  Yes, the fact that removing blight improves *everyone's* property values is key.  I've talked to an owner of nine adjacent properties - if I remove the blight, she might make more money from increases to her nine property values than I do from the deal! And yes, seller financing is potentially available.  But I don't have a cash crunch issue - the total value is the problem.  I'll talk to community members about donating time, either skilled (plumbers, electrician) or unskilled (help with demo).  I appreciate all the thoughts!

Michaela G. · Answer

Maybe you can get the seller to do 100% owner financing for 5 years and get people in the community, that work in different trades, offer labor for free. things like painting etc. Maybe there are electrician, plumber, roofer in the area, who'd love to see this change.

Getting great terms from a seller can outweigh price in some cases

Thomas S. · Answer

Your wasting your time if the end result is paying more for a property than it is worth regardless of whose money it is. Make a standing offer based on what it is worth to you as is and walk away.

You are letting the seeds of charity grow in your head which will ultimately only be in conflict with your business interests.

Bill S. · Answer

@Sam Dangremond unless the folks want to give you or the seller their money to better the community there is not really a way to make the "deal" work. I'm not sure of how some of the online funding sites work but perhaps using one of those as a place where folks can vote with their pocket books. The one that comes to mind is "go fund me".

Something to keep in mind is that if you buy the worst place in the neighborhood it elevates the property values of all. Not sure if you situation would allow for some global forced appreciation that could push the deal over the top for you. That is, taking out the worst property in the area might increase the ARV of the property because the "ARV" of the whole area goes up.

Sam Dangremond · Answer

Thank you for your response!Yes, getting the community to "put thier money where thier mouth is" is the goal, but I'm not sure the best way to try to do that.

There's no issue about having the cash, I have plenty - the problem is making a bad investment into a good one.  I won't buy a bad investment, so if purchase price + repair cost is more than ARV... I have to pass on the deal.  But if the community can somehow help me reduce either the purchase price or the repair cost... then I'd be happy to invest my money.

James C. · Answer

Sam,

Are they willing to put their money where their (collective) mouths are? Create a form of community supported fund to buy the property, or have them all as equity investors and split the profits (Syndication)? Can you get the town/city on board to condemn the property, or does the owner owe back taxes on it?

If you can do equity... something like you get 20% for your participation in making it happen, the investors get 80% of the NET cash flow and appreciation, run those numbers and see if it works.

After that, I'm out of ideas.

Hope this helps.

Jim