This may be a stupid question, but I have to know the answer. Have you ever purchased a property on impulse - without ever seeing it in person, without doing your full due dilegence. The property was dirt cheap. You did at least know the comps and you felt good about it, so you put a contract on it.
If you have ever done that, please tell me your experience.
I know that this is not the smart way to go, but I am very curious to find out if I am the only one that has had the feeling to just go for it and deal with the consequences later.
I saw a deal on Loopnet on Thursday and had it in the title company on Friday by 3PM with the earnest money to follow. It is in Corpus Christi which is a 3.5 hour drive from my home in Austin. All I saw was a picture and the price of $165K for the 30,000 foot building. I did the due diligence for the hard money loan and closed on the purchase at full price within 60 days. I tried to do it faster but the inspectors and lender slowed me down a bit. I was only a week late according to the contract so not too bad over all. At first I thought it only needed about $100K in rehab but the estimates came in at $220K but the appraisal for the ARV came in $200K more than expected so I got a great deal in the works. I risked the $500 earnest money and the appraisal money of $1600 and inspection fees of over $5K but got the deal financed. I was nervous too especially since the funds were borrowed. Soon I will be able to write another success story of how I made $300K on the deal.
I did it one time many years ago. Found a run down house in a great location. Got scared and got out of the contract. Today that is one of the best looking houses on the block. I could have made an easy 30,000 if I had kept it.
I never go out and look at properties it is a waste of my time… Face it this is a numbers game not a who bought the best looking house for the cheapest price… If the numbers are good BUY IT!!! You can always get out of the contract if the appraisal is not what you were told and or if you do not like something on the inspection…
I am considering putting a contract on a row house/townhouse for $20,000. I have not seen the home in person, only in pictures. I was told that the home in basically a shell in need of gut and rehab. The structure is pretty sound. It’s located in a nice neighborhood.
There is another home similar to this one, that is listed for $70,000.
Just going off of this little bit of information, does it make sense for me to pursue this deal? And if so, what should I be looking for, or doing at this point?
As you can tell, I am very new to this and I have a lot more learning to do, but I know myself, I will research myself out of something, because I will read and read and read and not act. I am hands on. I need to be out in the mix.
My opinion is that it is not worth it. This is based on the little that you mentioned. If it truly needs to be gutted and rebuilt, that is a could easily be 30k (or more).
On top of that, you have holding costs, selling costs, etc. Leaves a slim margin.
I have done it before and made decent money, doing every bit of the remodel myself, and have a brother that is a plumber and another brother who is an electrician. Doing it this way, I have essentially paid myself fairly for the remodel. I was absolutely sure that I could do it for 15k. If I were paying retail for the trades to do the work, it would have been less attractive.
I would say that if you have thin margins, you really do need to do a good inspection before buying.