Can someone give me the lowdown on ugly, vacant houses? Why are they so attractive to investors?
For example, I have a list of fire-damaged properties that I got from a young lady through networking and marketing. The only reason I got the list is because one of the programs I’m following says I should be looking for ugly, vacant, even fire-damaged houses.
But I can’t understand their attractiveness. Does the former owner still own the property? Is the mortgage active and due? If so, does it get paid off from insurance proceeds allowing a new owner/investor to start over? And if not, wouldn’t it be an automatic short sale due to the fact that the home is now damaged and worth much less than the mortgage amount? I’m just a little mystified by the whole thing.
I know how to find buyers, Craigslist, REIA, bandit signs, etc. but until I can wrap my head around this thing conceptually I won’t even bother looking for buyers. Can anyone help me out on this?
I don’t know either but that may be what works in Atlanta. I look for houses that are distressed not trashed. As a matter of fact I will fix 1 major system but no more. I will do the roof, electrical, plumbing, foundation or a/c but not any 2 of them. Fire damage tends to be more than that. Heck I bought a house that every other house just like it in the same neighborhood sold within 6 months for $120k I paid $60k and it didn’t need any work.
What investors are looking for is the deal not the damage.
Bingo. Investors just want to see they’ll make money. All other things being equal, the less work it needs the better. It’s just that the ugly houses tend to be cheaper, for obvious reasons.
I don’t purchase fire damaged houses. They always cost tons more money to fix than you would guess by looking at them.
Normally, the insurance pays to repair the damage. Sometimes they give the money to the home owner and he elects to walk off with the money.
The insurance might be turned over to the mortgage holder. In that case, some of the mortgage will be paid down, but no repairs done. If the house is a total wreck, the money is almost always given to the mortgage holder.
It’s not always going to be the same deal, so you have to find out the details before you make a firm commitment to purchase.
I rarely buy houses with serious structural flaws. I like houses that are “ugly” because they need new paint and new flooring. I can fix that quickly and easily.
I also purchase houses with bad landscaping because I know how to fix that. My guess is that most people don’t have a clue about landscaping.
I am a fan of buy the worst house on the best street. Ugly houses are easy to improve upon. I think of Armondo Montelongo, he puts alot of lipstick on pigs. I don’t agree with some of what he does but cosmetic improvements can make a huge difference fast. By just painting the exterior of a home one color and the trim another it is transforming. We remove a wall and put up a beam and an interior seems huge.
Fire damage is a tough one. I am a contractor. Depending on the damage which you really need to understand to analyze the properties potential be wary, or just stay away. Light damage to an isolated room is best. Demolition and framing can get expensive quick, plus drywall, finishing and everything else. I personally would not even consider a fire damaged house unless i can do the deal for 50% of after rehab value, just in case things get crazy.
As an investor I would want to undertake this kind of project with a contractor I have a relationship with and trust. Knowing his abilities and skill sets.
Ugly houses are much cheaper of course but I think its not that wise to buy distressed homes since it would require much of renovations or even remodeling. Best buys are cheaper good condition homes.
I agree that from a rehabber’s perspective the less work it needs the better, all other things being equal…however in general the more work it needs the cheaper you can buy it, hence the profit potential increases (unfortunately so does the risk). In theory it all balances out.
Point is, as long as the numbers are sound there’s still plenty of opportunity with distressed houses too.