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Tell me why I shouldn't....
Old 03-10-2008, 08:16 PM   #1
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Tell me why I shouldn't....

Today I went to look at a house that's very very cheap and in a very nice neighborhood. SO cheap, that I HAD to look at it to see why. Well, I don't see why. Don't get me wrong....it's a mess...but very fixable. I always look for the property that's such a deal it's a no-brainer...and it's taken me 2 yrs to find this one.

I have already fixed and rented 2 homes. One I bought for 12k, and have 22k invested after renovations...yes....22k. It's in the sorta-hood....and the tax value is 45k. The other I bought for 24k and have 34k invested. It's in the hillbilly hood, with a tax value of 59k. Each one is rented at $600/mo.


The one I saw today is in my town, in a more desirable location than my house(desirable to ME...which means a bit more rural....although you can still get to the major city within 10 mins.)The lot is .7 acres. It's essentially a total 'gut', except the following: siding, electric, and 300 of the 1100 total sf. The 300sf is an addition put on in 2000...vaulted ceiling in the bedroom...very nice. There's also a 3 car detached garage that's in usable shape, but no door. The tax value of this home is 78k. It's a bank owned repo on the market 30 days, reduced again to $13k!!!! Come on! $13k!!! It would rent for about $650/mo. Yes it's wet, needs a new roof, needs 75% new drywall,cabinets, bathroom, flooring, etc...whaddaya expect? But I do 80% of the work myself so I save a TON in labor.


So what's the problem? Well...financially I'm in a bit of a rut as my business has slowed down (duct cleaning). I JUST tapped into my savings for the first time ever. EVER. And it's eating me away!!! In about 2 months my lawn care business will be in full swing(which could be an issue as I'll be working 50 hr weeks), and that will cover expenses by itself til nov when duct cleaning goes CRAZY for 3 or 4 months...then the late winter/early spring lull... then rinse....repeat.

I also have a child due any day now, and a hormonal wife who would kill me if I bought another property. She wants me to wait IDEALLY forever, but she'd probably be okay if I wait til business pick up, the baby is here, I have more free time, etc. (read:next winter)


But I'm thinking for only $13k I could buy it and let it sit for all I care. It'd cost me about $130/mo in interest and taxes to carry the property(I'd use HELOC from the other rentals to keep cash reserves intact...can lock in at 6.25% right now)...and I could work at my leisure on rainy days etc...ramping up to full speed come November....

I mean, $13k is CHEAP. She just paid more for her van. the only UNKNOWNS on the property are the well and septic. Sometimes with a well,if you don't use it you lose it. And worse case the septic needs replaced...tank, leach bed, and all. So I'm assuming they both need major work. Even so...I think I can have this home in rentable shape for about $35-40k...and that's a total rehab down to the studs.


What should I do?
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Old 03-10-2008, 08:24 PM   #2
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Quote:
Originally Posted by thefed View Post
Today I went to look at a house that's very very cheap and in a very nice neighborhood. SO cheap, that I HAD to look at it to see why. Well, I don't see why. Don't get me wrong....it's a mess...but very fixable. I always look for the property that's such a deal it's a no-brainer...and it's taken me 2 yrs to find this one.

I have already fixed and rented 2 homes. One I bought for 12k, and have 22k invested after renovations...yes....22k. It's in the sorta-hood....and the tax value is 45k. The other I bought for 24k and have 34k invested. It's in the hillbilly hood, with a tax value of 59k. Each one is rented at $600/mo.


The one I saw today is in my town, in a more desirable location than my house(desirable to ME...which means a bit more rural....although you can still get to the major city within 10 mins.)The lot is .7 acres. It's essentially a total 'gut', except the following: siding, electric, and 300 of the 1100 total sf. The 300sf is an addition put on in 2000...vaulted ceiling in the bedroom...very nice. There's also a 3 car detached garage that's in usable shape, but no door. The tax value of this home is 78k. It's a bank owned repo on the market 30 days, reduced again to $13k!!!! Come on! $13k!!! It would rent for about $650/mo. Yes it's wet, needs a new roof, needs 75% new drywall,cabinets, bathroom, flooring, etc...whaddaya expect? But I do 80% of the work myself so I save a TON in labor.


So what's the problem? Well...financially I'm in a bit of a rut as my business has slowed down (duct cleaning). I JUST tapped into my savings for the first time ever. EVER. And it's eating me away!!! In about 2 months my lawn care business will be in full swing(which could be an issue as I'll be working 50 hr weeks), and that will cover expenses by itself til nov when duct cleaning goes CRAZY for 3 or 4 months...then the late winter/early spring lull... then rinse....repeat.

I also have a child due any day now, and a hormonal wife who would kill me if I bought another property. She wants me to wait IDEALLY forever, but she'd probably be okay if I wait til business pick up, the baby is here, I have more free time, etc. (read:next winter)


But I'm thinking for only $13k I could buy it and let it sit for all I care. It'd cost me about $130/mo in interest and taxes to carry the property(I'd use HELOC from the other rentals to keep cash reserves intact...can lock in at 6.25% right now)...and I could work at my leisure on rainy days etc...ramping up to full speed come November....

I mean, $13k is CHEAP. She just paid more for her van. the only UNKNOWNS on the property are the well and septic. Sometimes with a well,if you don't use it you lose it. And worse case the septic needs replaced...tank, leach bed, and all. So I'm assuming they both need major work. Even so...I think I can have this home in rentable shape for about $35-40k...and that's a total rehab down to the studs.


What should I do?
If it's so cheap, and you can handle it so easily, why are the voices in your head yelling "danger! danger!"? I think maybe you would be overextending yourself a little, or else you wouldn't have these concerns. The well and the septic could need attention. Maybe there's some other, worse problem. Personally, I wouldn't do it (but then, I'm a worrywart and not known for my great investment timing ).

Of course, the other side of the argument would be that if you aren't ready to jump at a great deal, you won't make any great deals.
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Old 03-10-2008, 08:27 PM   #3
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If it's so cheap, and you can handle it so easily, why are the voices in your head yelling "danger! danger!"? I think maybe you would be overextending yourself a little, or else you wouldn't have these concerns. The well and the septic could need attention. Maybe there's some other, worse problem. Personally, I wouldn't do it (but then, I'm a worrywart and not known for my great investment timing ).

Of course, the other side of the argument would be that if you aren't ready to jump at a great deal, you won't make any great deals.
the voices arent yelling DANGER...theyre yelling OPPORTUNITY

I just cant decide if it's a good opportunity...or a good time
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Old 03-10-2008, 08:30 PM   #4
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the voices arent yelling DANGER...theyre yelling OPPORTUNITY

I just cant decide if it's a good opportunity...or a good time
You said the duct cleaning business has slowed. I would be hesitant to purchase anything big right now. I would also wait until spring and see how the lawn business goes, people might even cut back on the lawn work??
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Old 03-10-2008, 08:33 PM   #5
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go for it. i know someone pay $5000.00 for a vacation. $13k for an investment is a no brainer. heck, my neighbor pays 3 times that for a car.

good luck

there's a will, there a way.

enuff
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Old 03-10-2008, 08:36 PM   #6
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go for it. i know someone pay $5000.00 for a vacation. $13k for an investment is a no brainer. heck, my neighbor pays 3 times that for a car.

good luck

there's a will, there a way.

enuff

But it is not just 13K its another 35+ to make it usable.
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Old 03-10-2008, 09:32 PM   #7
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But it is not just 13K its another 35+ to make it usable.
i dont know if i was clear, or if it matters, or if i misinterpreted your post...but i think i'd have a TOTAL of about 35k-40k in it, including the original 13k purchase price...not that it matters much...
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Old 03-11-2008, 01:01 AM   #8
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I think you should take some time with the wife, and enjoy life till the main business kicks in again. Meanwhile, send me the info and particulars on the property, and I'll take it off the market for you, so you won't feel cheated.
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Old 03-11-2008, 01:27 AM   #9
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Pay someone to check the stuff you can't, such as well and septic... if they check out.. buy...

BUT, you do say you need $30 to $40k to put into it... what about time? How long would it take you to get if fixed up to rent?

OR, would you move into it and rent out your current house? You did say it was a good location you like better...
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Old 03-11-2008, 03:23 AM   #10
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and a hormonal wife who would kill me if I bought another property.
Your numbers all make sense, but in the long run nothing is most
costly than really pissing off your wife.
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Old 03-11-2008, 08:16 AM   #11
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With two successfully done and a 3rd on the way it sounds like you are building a business as a landlord. And it sounds like you are capable enough to make it work. As long as you can carry the nut go for it -- you are simply investing in a successful business. I worked with janitors in schools on the south side of Chicago who did the same with old apartment buildings and over time became fairly well off on the landlord side.
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Old 03-11-2008, 08:48 AM   #12
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Your numbers all make sense, but in the long run nothing is most
costly than really pissing off your wife.
especially a pregnant hormonal wife !
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Old 03-11-2008, 10:47 AM   #13
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hmm, as a former pregnant hormonal woman - my conclusion would be that you are finding a way to not be there to help with poopy diapers the first couple of months!

from a totally objective p.o.v. it seems like a good opportunity. just make sure you can stretch all these ways and still be there to help the new mama and baby, especially since this is #2 right? someone will have to wrangle the older kid so mom can sleep and feed the babe.
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Old 03-11-2008, 04:17 PM   #14
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thanks for all the input..i do truly appreciate it


today I went to the house with my 'buddy' the well guy (hes a whack job but thinks we are friends? he treats everyone like this and is a really cool guy). he's serviced the well in the past,and pulled records from the neighbors...turns out wells in that area, including the neighbors are a-okay. worst case scenario is dig about 10 ft deeper to clear it out, new jet pump, and new tank....$2k max...i figured for 6k

I also am very worried about septic. The new EPA regs have increased costs 2 to 3-fold in the last 3 yrs. I got a new leach bed and tank for $5k 5 yrs ago. A similar project up to EPA regs now costs $9-15k!!! that could be a deal breaker. and you just dont know if it works or not until it A)backs up into the home or b) dirty water appears in the yard...neither of which will happen til the thing is used again. the best thing they can tell me is to call the health dept. to see if they have records of a recent update.

so until i decide what to do about the septic,im going to hold off...if i discover the septic has been updated in the last 20 yrs....then i'm all-in!! A thorough inspection shows no more issues than i anticipated.... actually there's bit less. although the squirrels that scared the CRAP out of me in the attic weren't expected!
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Old 03-15-2008, 10:51 AM   #15
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nothing good on the septic...so im gonna pass...



this fall looks to be the best time for me
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