Rehabs in a not so nice neighborhood - Posted by JoelD (WI)

Posted by Jen-LA on May 04, 2000 at 10:53:55:

we have a wonderful contractor who is worth his weight in gold- who gives us estimates on properties before we buy- estimates on the repairs we tell him we want done. Occasionally he will offer suggestions about termite damage he sees or cheaper ways to do stuff. He does EVERYTHING including plumbing and airconditioning (which is a big deal down here) and will give us one lump price.

Then we just take what he’s given us, and come up with an offering price and a price we need to get it for, and a price we’ll need to sell it for to make profit, and see if it all works. We usually work the numbers over and over for a couple of days to make sure nothing was forgotten. This way, there shouldn’t be any suprises.

Rehabs in a not so nice neighborhood - Posted by JoelD (WI)

Posted by JoelD (WI) on May 03, 2000 at 14:40:11:

Again, I am just getting started and I saw some tax foreclosures advertised in our local paper (MKE).

Anyhow, most of these properties are located in a not so nice part of town, and are for sale for around $10000. Looking at comps from the area homes have sold for $30 to $40,000. Do any of you have experience in doing fixer uppers in the bad part of town? If so are there additional risks - in addition to being mugged while mowing the lawn :slight_smile: It seems like if I could help fix up a neighborhood and make some money in the process it might be good for my soul and pocketbook.

Thanks -


Let City Hall be your marketing partner (long) - Posted by PatrickMD

Posted by PatrickMD on May 04, 2000 at 09:52:18:

Joel, all of our town governments need investors like you and me to help administer their financial assistance programs. What they lack in imagination they make up for in their aim to please. Put on your best suit that says, “I know how to manage MONEY!” (The opposite of what you’d wear on-site). After making an appointment (which shows you respect their valuable time, and time is money, right?), march right into your town mayor’s office. Explain your interest in helping rejuvenate troubled neighborhoods, and ask what financial assistance programs are available under the Smart Growth Initiatives for conscientious taxpayers like yourself who want to help the town rehab affordable housing for workers. You want to invest money in his or her town and keep it there! He or she should then introduce you to the director of your Housing Administration. By using the latest buzz words like “Smart Growth Initiatives” and “rehab affordable housing”, you should get the Red Carpet Treatment - and some low cost financial help to boot! (I’m in a bureaucracy myself; when the boss introduces a constituent with a problem, they get a lot of first class attention!) Then, once you’ve got their commitment negotiated, be sure to have the local newspaper send a reporter and a photographer to the contract signing for some major free advertising. If you can choreograph it so the mayor and the local Smart Growth administrator can be there, it may even get you on the front page! All politicians understand a little grandstanding goes a long way. Good investing!

Re: Rehabs in a not so nice neighborhood - Posted by Jen-LA

Posted by Jen-LA on May 03, 2000 at 14:57:35:

Joel- we’ve done two in “not so nice areas” and had no problems. We actually got to be friends with the neighbors in the process and they sort of “looked after” the house when we weren’t around. IE chasing off vandals and window breakers. At any rate, we stick with areas that are not just horrible, we wouldn’t live there, but didn’t mind driving through. If you do this, I think you’ll find that you get more and more comfortable every time you go back. Just drive your older car, wear overalls, and talk to people instead of looking scared.

I must say that I went into it thinking I would feel better about helping to fix up a neighborhood, and you know what, I did! It is very rewarding, as well as profitable. Just stay out of the REALLY bad areas and you’ll probably be suprised at how quiet the neighborhood is.

good luck,

RE City Hall, Has anyone done this? - Posted by Mel

Posted by Mel on May 07, 2000 at 22:09:49:

It sounds like a plan, but is it just a plan?

Re: Rehabs in a not so nice neighborhood - Posted by Jim IL

Posted by Jim IL on May 03, 2000 at 16:06:33:

The only thing that I add when dealing with these, other than my normal due diligence, is to factor in a longer holding cost.
These homes can be good money makers, but you need to know how long a home takes to sell in the area.
I flipped one to a guy last year, he fixed it up really nice, and started to market the home.
It is now 8 months later and he STILL has not sold it.
But, when I talked to him last he actually had an offer “pending”.
He was smaert though, he paid a really low price, and even told me going in he was prepared to hold this one for longer, and even had a backup plan of keeping it as a rental if it did not sell.

I personally pass on these, except to “flip” them, because I do not want to wait 6 mos to a year for my profit.
I’d rather do 5 $5k deals in 2 months that ONE $20k deal where I have to wait six months to get it.
But, that is just me.

Good luck, and let us know what you do with these.
It is always nice to hear about what other REI’s are doing, and how.

Take care,
Jim IL

Re: Rehabs in a not so nice neighborhood - Posted by JoelD(WI)

Posted by JoelD(WI) on May 03, 2000 at 15:29:10:

Thanks Jen. I appreciate the encouragement. Honestly I have never had a bad experience with the neighborhood - not that I am hanging out there everyday, but I can see how what you are saying would be true. As long as your not there working at 10 pm or something it is probably ok. Do you do the work yourself or contract it out? I guess how do you know if something is too run down for any hope of making some $$$?