Hello, forum. I need your guidance on a residential property that I evaluated today. Built in 1920; 9 Bedrooms; 4 baths; 4 levels, 3750 sq.ft. Property has major structural and cosmetic damage(cracks in some parts of foundation, wooden frame of house weak, original water pipes now leaking, electrical issues, rotten wood, etc.). Asking price: $280K. Comps: $600K. City has labeled property a living hazard. I’m not sure of all my options in making a profit from this deal.
I spoke with another investor who believes there’s too much structural damage done to save the home. He suggest demolishing and rebuilding. Here are my questions to you:
What are my exit strategies available in this type of situation?
Let’s just for the sake of argument presume that the cost of demolishing the existing property and building a new one is economically feasable.
What market are you in? I am in a very hot market. Even if I had the money, getting a construction crew to come out and actually build it for me would be a nightmare. All of the contractors are already hired. Chances are the contractor would show up long enough to drop off materials and start the job and then not show up for a month.
I am not saying this isn’t worth it, but you should really consider what it will cost and how long it will take to do. What is the zoning like in the area? How big is the lot? Would you be able to built multiple units on the property or to sub-divide it? If you can build several units on the property and then sell them as Condos or sub-divide it you might be able to increase your profit.
Hi Yaaman,
I’m wondering if you’re talking about the historic property in Takoma Park, MD. If so, I can tell you that when I called the owner/agent last week the first thing she told me was it needs a new foundation and at least 400K worth of work before I had even asked a question. I am just starting in this business so I’m no whiz but an investor/rehabber I ran the stats by said he would not touch it. And every book I’ve read says to run from a situation like this. Speed is the key in this business if I’m reading the books and chat forums like these correctly; there is not enough time or $ to rehab a property like that. Like the previous post here said, it could take months for the contractors just to get started and all that time you’re paying holding costs while material and labor costs are probably climbing with every unknown defect being revealed.
It is also in the historic district and subject to historical rennovation criteria - another pain in the neck from what I"ve heard. I love the idea of a restorted grand Victorian and it definitely would fit the style of that neighborhood but I think this is a little much for anyone that does not have very, very deep pockets and is willing to sweat it out. Even demolishing may not be cost effective.
Might want to pass on this.