I recently ran across an interesting situation concerning abandoned properties that for some reason keeps popping up. First off, this makes NO SENSE to me but i figured i’d run it across everyone and see what they thought.
I’ve started heavily researching abandoned properties being that my city is full of them. I know they will need a large amount of rehab but i think spending 10-15 and gaining 15-30k equity isn’t too bad. The problem is: I’ve contacted about 10 owners so far and although 3 said they’d “think about it” or they would meet with me, i’ve had 4 tell me that they keep the house for tax purposes. The first guy i spoke to told me it “offsets his income” even if he doesn’t rent it out and he gets MORE money back in tax’s. I’m not an accountant or anything, but this doesn’t seem to make sense.
I’ve tried targeting houses that don’t currently have any mortgages so i can start from scratch and I was assuming the owners would be happy to get rid of their “dead weight”, but i really wasn’t expecting this. Has anyone ever run across this sort of situation? Can a non-income producing property really (THATS PAID OFF) really do some good?
Empty doesn’t always mean distressed. You are looking for distressed properties not empty properties. I look for the 3 D’s (Death, Disease, Divorce) those are the stressors that consistently cause people to sell at a discount. There are other stressors like unemployment and things like that but. The fact that the house is empty does not always mean a good deal.
I know that there can be many different factors (such as those you mentioned) and i’ve actually tried to approach the properties that are just straight UGLY. Everything from roof needed to no windows at all to holes in the walls big enough to walk through. I figured that if i’m looking at the property estimating AT LEAST 10k in rehabs that once justified to the HO they would pretty much take off running. The houses in my target area have been sitting for around 2-3 years or more and have been vandalized, squatted in, etc. As of right now the only things I can’t handle are structural or HEAVY electrical issues and hopefully i’ll have that taken care of soon.
I guess my major questions is: can the tax benefits of owning few properties really be that beneficial if the property is left to decay?
Thoward,
The owner of those vacant properties offsetting their income are probably referring to depreciation. They would be smarter if they decided to offset their taxable income from a hefty capital gain from selling their unused property. A few thousand dollars in saved taxes every year can’t compare to a hundred thousand dollar capital gain. Often times in rehabs the name of the game is turning the unmotivated into the motivated. Properties don’t sit vacant for years unless someone is unmotivated to get rid of it. Figure out what these owners would use the money for if they sold their property. Maybe they’ve always wanted to go to Spain or France. Perhaps they’d like a Corvette. Find their motivation that they have yet to link with selling the property.
Those 3 D’s sounds like something I heard on Flip this/ that/ the House. How do you find people with diseases? There are 3 main ways to find a house; advertising, networking and searching. Searching and networking are always the most reliable because it’s you in your car driving around targeted neighborhoods, talking to the locals, responding to various ads you see, etc. If you have a big budget, professional advertising can also be fruitful. Sending a few people postcards once in a while is ineffective and a waste of money. Professional advertising works best when it’s redundant.