Undoing bad rehab - Posted by Bert G

Posted by Rosie(CA) on May 02, 1999 at 22:38:47:

I sympathize with you.
I’ve got a similar situation: great neighborhood but incompetent owner and ‘his buddy’ Do-It-Yourself’ed it into oblivion.

One example: Do-It-Yourself foundation work is a baaaad idea! They REMOVED the dirt from inside the crawl space to pour a concrete floor - after the foundation wall cracked and moved inward 1/4 inch they braced it with 2x4s and some concrete blocks. I believe entire house has moved off foundation. And here we are in earthquake country!!

I would expect it could be worth about $300K-$350K as perfect 2/1 on 7200 sf.

A broker told him it was worth $300K AS IS and that it can be rezoned to commercial then sell it as extension of parking lot for office building behind it, blah blah blah. It’s currently zoned R2.

He paid $96K (he said) for it 5 years ago, then destroyed it. And filled inside and outside with junk (neighbor called code enforcement about it). I will have my contractor look at it. I would only be willing to pay (i.e. take subject to existing private note) about what he still owes on it (he said $74K) due to probability of demolishing existing house and rebuilding new one. And I’d try to buy the note at a discount too!

Have to confirm the facts and get the visions of $$$ out of his head.

Good luck on your situation. I’ll be interested to hear what the others suggest. I think these owners should pay us!


Undoing bad rehab - Posted by Bert G

Posted by Bert G on May 02, 1999 at 12:26:38:

Anybody ever take on a house where the biggest problem was the previous owners attempts at rehab?

I looked at a house yesterday,(brand new listing) 2/1, 870 sq ft, pretty run down, with a building permit in the window. Owner is asking $28K, tax dept says its worth $34k (I know, that doesn’t mean much) and the realtor says that in pristine conditions it would probably go in the high 30’s. The house next door was stamped out of the same mold, and is just darling. My town doesn’t have any bad neighborhoods, but this is in the closest thing to it.

You can tell someone’s been trying to improve it, but didn’t have a clue. For example, they installed a tub surround right over an existing window (interesting lighting effect that way). Of course after the flood it has brand new furnace, WH and electic service, but they moved the elec panel onto a wall in the kitchen, right where a stove would logically go. Speaking of the kitchen, it has a brand new countertop, but no cabinets! (nice skylight though) You go into the bedroom, you see the back of the electric panel in the middle of what was once a door. The basement has been completely refinished, aparently by a crosseyed chimpanzee. Oh yea, one more thing. The house has NO CLOSETS! I’m guessing about $8,000 for repairs. Owner plans to move out in about a month, and has junk all over the place.

Using Mr. Legrand’s formula, I figure a MAO of 18.5, thought I might offer 16.5 for starters. About the only reason I’m considering this is that it would be my first flip, and if it goes south I wouldn’t be out all that much. I’m thinking of just writing a check for the purchace, then get a loan based on ARV. I’m pretty sure that if I could get it bought and repaired for under $25K, if it doesn’t sell I could rent it with a cap rate of about 15%.

Should I go for it, or run away?

Bert G