A few days ago, as I do often, I walked through a bunch of houses. Right now in our market, the good houses are flying off the shelves — and generally for more money than they have been. Dangit. So I’ve been even more on top of properties new to the market in order to assess them and see what is out there and available.
Overall, there have been fewer properties, listed at a higher price, selling for more — and having more and more issues, in worse condition. #yesImightbewhining
There were 5 properties on my list this morning, and I began my search in a neighborhood near my house. I approached the house, which was at the bottom of a sweeping hill, in a mixed-owner occupant and rental neighborhood with houses in the $70k – $100k range. This house is listed for $23k…and bank owned.
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From the outside, it looked like it needed a new roof, some yard work, some work on the deck, but there were no noticeable foundation issues.
I walked into the house, and it was pretty normal for REO/bank owned properties — some mold, drywall repair, some broken windows, even some daylight coming in from outside. Decent “bones,” as we say…as in, the layout was decent, the property seemed to be fine structurally — and looked like it had some possibility.
But it was pretty tight within my rules of buying in terms of % to ARV and all-in costs to overall values. Both were pushing the envelope. I left from there, drove a few more streets around just to make sure I had a good handle on the subject and surrounding properties, and then moved on to the next.
The next house was in a section of town that I haven’t yet bought into.
It was a bungalow-style property. Beautiful brick facade on much of the property and in a section of town that has front yards that are pretty steep up to the property. It had a drive on the side and garage in the back of the lot.
I walked into what was its once-grand doorway and was immediately met by the smell of mold and old. The house was cool. This is one of those that fed my desire to make the neighborhood better — and the house, if it would have been in a better neighborhood, I would have been able to sell in the $200-$300k range, rather than the selling price in the $20k range. What a terrible shame.
Overall, I loved this house. Even with the broken-out windows, the gaping hole in the roof, the fact that it needed a new roof, HVAC and windows, as well as a complete renovation of the disaster of a garage…it was a cool house. And I really was feeling it. I loved the hardwoods, and I generally adore old houses like these with character. It’s a great feeling to bring them back to life, give someone a wonderful place to live — all while buying another investment that makes us more passive income.
I took another look around the outside, snooped at the neighbors, and then got into my car to head to the next property.
As I approached the next house, I quickly felt like I was not in the part of town I wanted to be in. Narrow street. Lots of people out in front of their places, and I clearly didn’t “belong” in the neighborhood with my newer car and favorite Ray Ban shades on — not that it matters what I drive or sunglasses I wear; rather, I just wasn’t exactly getting the friendly vibe back from folks as I gave them a smile, nod or wave.
I pulled off to the side of the street the best I could, pulled out the next address for the the GPS and started to slowly pull up to the end of the street. At that moment I decided I would move on. No matter how good the numbers would have been, it just didn’t pass the gut test.
I kid you not, like a slow motion made-for-TV drama, this police officer in a marked SUV squad car flew onto the street, pulling in sideways, his brakes screeching as he swerved across lanes. Stopping a foot from my bumper, he blocked my path.
HE THEN PULLED OUT HIS GUN. And began screaming.
The good news: the gun and screaming weren’t directly at me.
The bad news: he and his car were so close to me, I could have reached out and nearly touched him from my window.
Within 10-20 seconds there wasn’t just one police officer or police car — there were 4-5, all screaming, guns drawn, pointing at a jeep with 3-4 people in it that was DIRECTLY behind my car.
So let me remind you, I pulled towards the end of the street, police car blocks me in, jeep behind me pulls closer to me, police car pulls in behind jeep, another police car pulls up behind car in front of me, and then another to the other side in front of me. All officers are screaming for the guys to get out, with guns drawn.
Yes, that put’s me squarely in the middle of this “altercation,” as we might call it, a situation I had no need or desire to be in the middle of.
As this thing plays out, my heart rate had gone…say, up a few beats. I rolled my window down and as calmly as I could, asked the officer in front of me if I could “leave now.”
He chuckled, and said, “Just a minute.” Yeah, I laughed too. What else do I do… #besidespeemypants
Right. The officer eventually walks past my car, the guys in the jeep are all taken out of it (not that I saw most of it…I had my head down as far as I could get it)
He taps on the trunk of the car like a coach giving a pat to his player after a good play and says, “Have a great day. You can go now.”
Get me the hell out of here!!!
I will be honest: I took a couple turns, driving slowly, counting my blessings and wondering what I had gotten myself into.
I know of quite a few investors who own properties over in that area, and who knows, maybe they never had that kind of experience. But it was enough for me. I even had the “do I really want to be in this business” conversation with myself.
Who am I kidding, of course I do.
Just NOT is this neighborhood.
1. Do Your Homework
If it isn’t you, have someone that you trust who will give you actual feedback about the subject property, the surrounding properties and the overall neighborhood.
Make sure you understand what you are getting into before you buy it. It’s a lot easier to drive away(once the police officer lets you pass) than to deal with a bad house, bad neighborhood or bad tenant.
2. Don’t Get Discouraged
It’s a fact: we spend a lot of time looking at properties we will never buy. Or, let me say, you SHOULD be looking at a lot of properties in order to find the good ones. And get your method down. And know what you are looking for.
Just like this instance, the house could be in the wrong part of town. In this particular situation, I found somewhere I didn’t want to be — but that doesn’t mean that my real estate business is bad or that my intentions weren’t good. Just take it as another life lesson, another time for learning, another time you moved on with another tool in your real estate tool box.
3. Be Safe
I have to say, I thought of my kiddos and wife as I was sitting there hoping that no real bullets would fly.
And believe me, I was scared out of my brains to be sitting in the middle of something I had nothing to do with. I don’t know if there is really something in THAT situation I could have done differently, but overall, we have to be very vigilant.
When you look into vacant properties, make sure you survey the outside and check out the neighbors. Are there people scoping the house, scoping the neighborhood? Be careful.
Once you are inside the house, if you are by yourself, make sure you check how you would get out of the house. Know the exits. It’s just a matter of being careful and knowing how to care for yourself. This is not just for a C-class neighborhood; it’s for any house that has vacant for a while. Believe me…I’ve seen those broken into too.
So bring it! What are your crazy police or vacant property stories? What else can we learn from our community here as we learn to be better investors?
Please comment below!