Red Flags??

Here’s the deal:

Purchase Price $85,000
Rehab Costs $50,000
ARV $195,000

I’ve been watching this house for 4 years now waiting for the opportunity to snatch it up. This house is in a good neighborhood, has been an obvious eye sore for a long time, but has an extreme amount of potential. I have met the owner and got the chance to walk through the house yesterday, only to find much less cosmetic things needed to be done than I thought, but much more of the scary stuff that most people say stay away from.

The owner hasn’t been in the house for over 3 years, and the basement flooded at one point, and now there’s mold everywhere. There’s also some rot on the siding, and what looks to be just a little bit of termite damage, although no signs of termites now. Obviously the inspection will give me a better idea to what extent, if any, termite damage there is.

I have a landscaper coming to give me an estimate on re-routing the water away from the home, and provided the price he gives me is within my budget, I plan to make an offer contingent upon inspection.

My question is…would mold, rot, and possible termite damage all be such red flags that would make you completely scrap this deal right away, even with such a large spread? My thoughts are if it can be repaired within my budget and still be profitable, why not?

Your thoughts and opinions are appreciated. :slight_smile:

Hello, Be very careful and do all the research before placing an offer. If your on a budget for repairs, stick to it. How are your comps? Appraised value? etc.?

I would have a VERY qualified inspector take a look at it…there may be horrific damage that you cannot see…like rotten sills, etc.

Termites do NOT go away on their own or usually even with help…they just get worse and go to places you can neither see nor sometimes fathom.

Mold can be a huge issue. What caused the flooding? Bad grading? Unseen springs below the surface? Bad pipes? Until you solve the real water issue, you cannot even start on the mold issue which run anywhere from “minor” to “beyond comprehension”!

Be careful with this one!


See my post above “DANGER LURKS.”

Thanks so much for the quick replies.

RE: Flooding…this particular lot sits lower than the houses around it, so it gets all the overflow from the neighbors. I had a landscaper friend look at it today, and another one is coming out tomorrow to give me an estimate. The one who saw it today said that the lot could be graded to run the water away from the house by bringing the ground level a bit higher at the house. The goal would be to re- direct the water to a lower level, possibly into a dry bed that would appear to be done on purpose, as part of the landscaping job.

RE: Mold…all of it (that can be seen with the naked eye anyway) is about 1/3rd of the way up on the basement walls. I planned on ripping out all of the drywall and replacing it and whatever else needs to be done to get rid of it, providing the inspector doesn’t find it in places that simply cannot be repaired.

RE: Termites…I’m not positive that that is the case; it just appears to me that could be an issue. Guess I’ll wait to hear what the inspector has to say about that.

I’m very frustrated because this house is a classic diamond in the rough, and I feel that if I walk away from it, 6 months from now I’ll drive by and see it all fixed up and another investor will have profited greatly from a deal I could have had.

As of now, my plan is to pay an inspector to come in and take a thorough look to see what he has to say, and go from there. I just don’t know what to do.

So tell the truth…would you guys run like hell?!

Thanks again for your help, I really do appreciate it.

<<So tell the truth…would you guys run like hell?!>>

No, I would no ‘run like hell’ but I would approach very cautiously and due plenty of ‘due diligence’!


Hi All,

Just wanted to give you guys a quick update. I met with two landscapers, both of which said that the only way to fix the flooding issue is to install a pump and pump the water up to the street. Unfortunatly this pump comes with a $30,000 price tag.

Needless to say, I have sadly walked away from the deal.

After talking with the owner more, she ended up telling me that she’s been fighting the County for 17 years, turns out this lot wasn’t even supposed to be zoned for a house, it was supposed to be used as a resivoir. I learned that another investor is buying the property, and supposedly already has a renter. I’m wondering what he’s going to do to rectify the flooding issue. ::slight_smile:

This is a very hard deal for me to walk away from, but my thankfully my morals override my need to make a buck.

Thanks again for the advice.

I think she ment Detention pond or basin. You didn’t lose here. The other “investor’s” can end up suing him for mold sickness, that is will always be a problem property.


If you have to comprimise your own integrity to make a deal work it is NOT a deal!!!

There are few things in life that we own “free and clear”, the greatest of which is our own personal reputation!

What good is owning the whole world if we must forfeit our own integrity to own it?

My opinion (as they say here): YOU DONE GOOD…!


Thanks for the encouraging words Keith.

Back to the drawing board. :frowning:

Such is REI…don’t despair, don’t rush. Your deal will come!