Hi,
I have a unique problem.
I bought a property at auction the end of aug.
I bought it for about 4,800. and its as is value is about 19,900. ARV is about 45,000.00 conservatively.
Sounds great right?
Ok. the problem is, as winter, (I’m in Mi.) was nearing, I called the city to see what their plans for the prop was and how long I had to start thinking about rehab. They told me as long as I needed.
I then asked who they used for board up and winterization as we are 2 1/2 hrs. away and could not start rehab til spring. They agreed it was sensible to wait til spring, we paid 370.00 for winterization and board up. Then two weeks later I get notification that this home is on the demo. list and will be demo’d in 30 days if I don’t apply for permits and start work on roof, windows, and siding.
Let me tell you that was a shock… Didn’t plan on roofing in Nov. in Mi.
( I have since found guys who will do it )
Since we wern’t prepared financially to start rehab til spring ( we recently invested our available funds due to the fact the city allowed us til spring )
I am left with a huge problem.
I have the prop. listed w/ an agent who thought it was a great deal and could flip it to one of his many investors in about a one-two wk. period.
There has been much intrest but no bites.
Either they have all they can take on or they don’t want to invest their “winter funds”
I have until Fri. to pull permits, also this is a target area and a grant of 20,000. is avaialable but I would have to quit claim deed it to my son-in-law as it is an owner occupied grant.
We are only asking 12,900.
Should I lower the price to 10,000. or check into hard money lending?
We need roof, siding, windows, elec. update. (has new furnace and water heater), plumbing update, paint and a little plaster wall repair. It has hard wood floors that we would refinish. If we do the work we estimate about 15,000. I know it’s conservative, but we’ve done rehabs before and I do alot of the work.
I just can’t see starting in Nov., especially since its a long drive.
HELP…Any advice is appreciated
Wendy
hanatal,
I would lower the price to whatever price is needed to sell it quickly. Basically, anything you can get over $5,000 is profit if you paid cash. This is one of those deals that is excellent if someone can do the work themselves, but marginal if they need to use contractors. This is the kind of deals that I do here in Ohio, but I do most of the work myself. If the materials are $15K and I agree that sounds about right, then it will be about $30K to have contractors do it. That puts an investor at $35K plus holding costs if they can’t do the work themselves. A little marginal unless the investor is a landlord that can make the numbers work.
So, I’d sell it unless you are prepared to pull permits. BTW, simply pulling permits might buy you 6 months or a year. I’d talk to the city and ask them.
Mike
Thanks Mike,
We could do some of the work if we have to but not all.
In my county (Gennesee) if we pull a permit we have 6 months to start work. I asked the inspector if that would be ok and he said he wanted to see work began in 30 days after the permit.
I need to find out if that is just what HE would like to see or if in fact it could buy me time to flip.
Hopefully, I 'll find an my agaent has an offer for me on Mon. ----Pure optimism----.
If not I think your riht. I need to find out more specifically on the time frame.
Thanks again,
Wendy
Hi Wendy,
I had a similar situation with a client’s property here in the Puget Sound area. You have to learn how to work (not with), but work the city.
I had been trying to get a meeting with the city, primarily with the chief of police, since May and suddenly in September the Building and Safety were about to demand a meeting at the property for, although they didn’t say at the time, purposes of shutting down the building. 24 units, 17 occupied, 7 demo’d and awaiting funding or sale for rehab (I have the listing on the property, as well as manage the property). I informed their representative that they probably wanted to reconsider the time, place and intent of their meeting as they wouldn’t want the media coverage that their action would bring. They rescheduled for their office at which there was present police, fire, building and safety, their favorite realtor (conflict-?), myself and my partner. Late to the meeting was the fellow who was about to pull the trigger on shutting down the building.
My partner began by telling them that the city police crew was worthless. Our first experience with them was we took over management of another building where the previous incompetent management company spent the owner’s money two times to evict the same tenant, and now he was back. We showed up with the Writ for the eviction, called the police who came, but, although the tenant even admitted that he gained access by breaking and entering, refused to evict the tenant and his two small children because it was raining. Puget Sound . . . it always rains.
The police leave, my partner and I, in the pouring rain, wait until the man leaves that evening, knowing our next call was to child protective services, and enter the unit as we were legally entitled to do. My partner removed all the tresspasser’s belongings while I kept watch at the front door . . . the neighborhood was occupied by . . . marginal tenants: murderers, child molesters, etc. Of course the prior manager never mentioned any of that.
My partner had their attention. I then proceeded to let them know that we had been trying to get the meeting but the police liaison kept blowing me off. I had copies of all the emails with me.
Long story short, we entered an ‘agreement’ with the city rather than receiving an ‘order’ from them. What matters is the documentation.
You state they informed you that you had until Spring? Is that documented anywhere or was it just phone or personal conversations? That’s for starters but if you don’t have anything documented, that’s okay.
What you want to do is let them know that you want to work with them but that also means they need to work with you. Come to some agreement wherein they believe you are serious about your rehab plans and if necessary an agreement as to a minimum showing on your part that you are complying with what they want to see going forward.
Documentation makes all the difference and the more you have the stronger your position will be.
Mike provides a good option but if you really want the project for the Spring and can swing it by playing a little hard ball . . . try to do it. And Mike’s right about pulling permits . . . it can buy you time because that brings in revenues for them. They like that.
Hope this helps.
Good luck and keep us posted.
Cate