I bought a rental house (buy and hold) in my hometown back in November. It was a 3/1 with ARV of about 75-90k. I got it under contract for $29,900 and discovered that it had some foundation problems. I hired a structural engineer who gave his recommendation to put a beam under it with an estimated cost of 3-4k and was able to negotiate the cost down to $28,400 but the bank wouldn’t go any lower. I decided not to back out of the contract. The house had a crawlspace that had no access, so was unable to inspect the basement.
Got it closed and cut a hole in the floor. It was a mess underneath! Everything was rotted and I wasn’t sure what was holding the house together. We kept cutting holes in the floor and the problems just got worse and worse. My exit strategy turned into completely replacing the floor and rim joist and then remodeling the house for resale, but even more surprises showed up and I ended up calling an excavator to tear it down. That was the best decision I made here. Luckily I only had a few hundred bucks into the house before I made that call.
Got it cleaned up and the church next door is buying it for parking for $35k. I’ll probably lose a little bit on it but it could have been so much worse!!
I’m just counting my blessings here!
Good thing you were able to find an exit strategy. Although I’ve only been doing rentals this a couple of years, this is why I personally avoid offers (or back out during inspection) on properties with problems that are hard to quantify in advance (widespread mold is another one).
The last property I bought was originally a very basic 1000 sq ft 3/1 rancher built in the 1950s that had a den added on to the rear and some kind of room added on the to far side in the 70s. When purchased I knew there was a fair amount of termite damage to the room added on to the side as you could see the sill plate and rim joists were pretty chewed up. Also, the room was waist deep in trash. What I didn’t realize was the room was actually shoulder deep in trash because the termite damage was so bad it had collapsed the floor into the crawlspace, the rear wall was practically gone, and the termites had advanced into the piles of books and furniture in the collapsed crawlspace. Luckily the termites had stopped one joist before the original house. I jacked the room up using the ceiling joists for support and replaced the entire floor from foundation to subfloor with pressure treated lumber as well as the back wall, after a serious termite treatment of the foundation and floor of the crawlspace. That was just one of several surprises that house provided me. It is now my best cash flowing property.
Well, just got my end of the contract signed. It should close on the 5th.
The coolest part is that I am sitting on the beach when I electronically signed everything. I always figured I would know that my investing career has matured when I was sitting on the beach closing real estate deals. It just happened earlier than I thought!