Posted by LK on June 16, 2006 at 18:59:13:
The lot value depends on the septic system condition. An engineered design system can go up to $15,000. That would make the lot worth nothing. If you could install a conventional septic system for $2500, the lot would be worth $12,500.
The existing tenants worry me. To see how they live , I am growing more reluctant to enter into a contract of any type with them.
Need opinions on an occupied “dump” - Posted by LK
Posted by LK on June 15, 2006 at 21:33:16:
I hated to call it a dump, but couldn?t think of a better term that fit. I have a contract for $15,000 on a 1200 SF 4/1 SFR that is occupied at $350/mo rent. Contract is contingent on septic inspection and structural inspection. The house is awful. Uneven, filthy floors, holes in walls and ceiling, primitive bathroom/kitchen, bad plumbing, bad wiring, leaking roof, etc, etc. The house needs to be torn down, not rehabbed. With $35-$40K in repairs the house may be worth $75-$80K. Tenants have been in house 4 years making minor repairs and want to stay. They would like to buy but don?t have a down payment.
From a preliminary investigation, I can see the septic system has problems, although the owner stated that she spent $4000 on repairs recently. So, with that said, I can walk and probably will. I may use the septic problems as a negotiating tool to get the price down.
My first thought on the deal was continue renting for $350/month to pay off the purchase price and at least have a free and clear lot.
The problem for me is the liability and maintenance of renting such a bad property. If I did a contract for deed it would take away liability and maintenance but leave me with a dump if I get it back.
I know the consensus here will probably be move on, but I like a challenge. On a side note, there is a vacant lot adjoining this property (both .5 acre each) that I can get for a good price. This would give me 1 acre in a fast growing area with new subdivisions being built close by.
Re: Need opinions on an occupied “dump” - Posted by Al Miller
Posted by Al Miller on June 16, 2006 at 14:07:47:
MOST INVESTORS WANT A FIXER.
OR A BANK FORECLOSURE.
NET YOUR PROFIT OUT AND SELL IT AS A FIXER.
READ RON LEGRAND ON ADVERTISING FIXERS. GOOD LUCK.
Re: Need opinions on an occupied “dump” - Posted by Bill H
Posted by Bill H on June 16, 2006 at 13:12:53:
Seems I remember a story about a very wealthy investor who rented these “dumps” as you call them. Something happened, the courts decided that if he could rent them then he could live in them and his sentence was a long time living in them…not in his mansion.
What would you do under similar circumstances?
I have been in and aroud this business for a lot of years and have never found the need to put my tenants in a place that I would not live in…MOVE ON…forget the challenge…while you are fixing and repairng, cussin and sweatin over this mess, I’ll make another 100K with nice clean hands.
Good Luck,
Bill H
Re: Need opinions on an occupied “dump” - Posted by IA Jeff
Posted by IA Jeff on June 15, 2006 at 22:33:16:
My first thought is to sell it to the current renters for 40k on a land contract. If you ge it back, scrape & build…What are .5 acre lots worth?
I once bought an unoccupied dog for 7k & sold on land contract for 25, starting 2nd year of 5 year deal now.
Jeff
Re: Need opinions on an occupied “dump” - Posted by LK
Posted by LK on June 16, 2006 at 18:51:12:
That was just about the answer I was looking for but did not want to hear. Ive always said that all of my properties would be something that I was willing to live in myself. As I’ve expanded my investments, Ive been looking at things that I would not have considered in the past and tried to make it work. But you are right, I can do as well on other things without taking on additional risk and welcoming a headache. I was letting the speculative potential of the property cloud the present situation; a property in need of major maintenance with a questionable tenant.