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Are we crazy to consider this?

Posted by weedyacres (My Page) on
Tue, Jul 15, 14 at 12:33

We are currently living in a 100-year-old 920 sf house that is mid-DIY remodel. We expect to be done by year-end. We downsized from a 4000 sf house, sold off tons of stuff, and are trying to make our current house work for the 2 of us, size-wise. We're kind of 60/40 on whether it will, when all the remodeling is done. It has no garage...a big deal for Mr. Weedy.

We've had our eye on a house around the corner that is a bit overgrown, but from the outside seems to have good potential curb appeal. It's all brick, solid, probably 100-year-old vintage, with a giant detached garage in matching brick. Mr. Weedy would love to rent the garage.

Yesterday evening we saw a car parked there, so we knocked on the door, got a tour, and learned what the scoop is on the place. The owner's wife died a few years ago and he went into a nursing home a few months ago. Relatives who live a bit out of town are trying to take basic care of the place and sell off stuff, to clean out the house for eventual sale. They are feeling overwhelmed by the task.

The house is crammed full of stuff, from a few very nice antiques to just junk. It seems to have solid bones and decent mechanicals, but shows some wear, so it's a fixer. The layout is decent except I'm not sure that we can adequately improve the kitchen size and layout.

I'm guessing the house is in the range of 1500-2000 sf + basement, 3 bedrooms, 2 bathrooms. Laundry hookups on all 3 floors. :-) Value in current state is probably somewhere in the 30-50K range. Theoretical fixed-up value might be 90K (depends on sf), but I think that's tipping up at the high end of the neighborhood.

So now we've got pertinent contact information and a basic idea of the project, should we choose to take it on. Are we crazy to consider this when we've not finished the one we've started? One thought we had was to do a basic clean-up and rent it out for a year, and then boot the tenants when we're ready to really renovate.

And let's say we decided to go for it. Thoughts on how to go about ascertaining a good (for us) offer price? I think there's a mortgage on it (need to check at the courthouse), the relatives didn't know any of the details like age or square footage. We definitely got the sense that it would be a huge load off the relatives' minds to get rid of the thing as quickly as possible, so perhaps an as-is offer (take what you want and we'll clean the rest out) coupled with not needing to pay a realtor or do any fixing up would be very attractive.

Thoughts/advice?


Follow-Up Postings:

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RE: Are we crazy to consider this?

No more crazy than the rest of us. If you know and like the neighborhood, and especially if you think it has any upward potential as the economy recovers it sounds as if it has potential. The rent and wait scenario is good if your local rents would come close to the mortgage plus taxes amount. You'd need to see what it needs to meet rental property standards, they can be more stringent than owner-occupied in terms of alarms, lead abatement, etc, requiring up front work. Unless you're also young and strong two major projects at once would be a lot.

Having a good garage/workshop is worth a whole lot ;-)

I'm looking at building a small garage and it's going to cost nearly what that house plus garage is going for. Clearly doing something wrong.


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RE: Are we crazy to consider this?

You have been around this forum (and maybe others) for awhile and also have experience buying/selling. If you could get everything at a price you could afford, go for it. Would it include the antiques and junk? Maybe there is something there that could/will pay for redoing it. Can't remember if you have had experience renting out or not---
Would this be close enough for you to use and lock stuff in the garage? Not sure about renting--just for year etc Check with your tax person. Would this be something you might want to move into yourself? Is there a basement?
Does the interior show leaks/water damage? Does sound interesting and for the right price to you, might be something to do in your spare time (LOL)
Good luck--oh yes, check to see if there is a mortgage/or liens firsl/
Marie
Yes I have enjoyed your past adventures.


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RE: Are we crazy to consider this?

This is in a working class neighborhood in a small town in the midwest, so we never expect major price appreciation. It would be a case of buying right and being smart about what to spend making it pretty. We would plan to move into it once done, since it's bigger and has a garage and basement. The renter would just be a cash flow thing until we have time to renovate.

Our ability to do 2 projects at once is more a question of time than energy (or youth).

We have experience landlording, and the rental ratios are good here (houses cheap, rents relatively high), so we could likely rent it for around $700/mo. Even if our expenses were 50% of that, if we bought it for $30K, that's a 14% return (any renovations would drive that down, of course).

We didn't see any signs of water damage on the inside, and the brick is pristine: no settling or cracking.

The city does do inspections of rental properties. I'll get the details on that as well as look up liens at the courthouse tomorrow.


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RE: Are we crazy to consider this?

Rent the current house, and fix up the other one for yourself.


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RE: Are we crazy to consider this?

You have taken so much into consideration regarding buying the other house. I don't think too much gets past you, so you will make the best decision for you and your DH. For the record I think it sounds like an opportunity.


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RE: Are we crazy to consider this?

Can't wait to see where Grandpa Weedy's chest ends up next!


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RE: Are we crazy to consider this?

A trip to the courthouse told me:
Original mortgage in 1996: $70K
at least 6 refi's/2nd mortgages since then
Most recent mortgage in 2006: $87K
The owner has a creditor judgement on him from March.
Methinks he's likely in arrears on his current mortgage and this would be a short sale. Advice on how/if to proceed? Should/can I contact the bank? Is there any hope of gaining traction there?

Assessor also told me taxes are $2900/year and estimated market value $100K (she said assessment x 3 = market value is the rule). That's very high taxes for a house this old, usually seen around here on <20 year old homes worth $175-ish. Our house is worth $60K and taxes are $600/year. So I'm not real keen on quintupling our taxes.

I need to find an appraiser to help me with comps/market value, and see if anything in the neighborhood can really sell for $100K.


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RE: Are we crazy to consider this?

One of the things is that short sale/bank transactions can be very long, like almost a year, at least around where I live.


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RE: Are we crazy to consider this?

I think you are going in the right direction. We never sold the house we raised our kids in, and have been empty nesters for eons. But now our kids (in their late 30s and early 40s) are marrying and having babies, and we can put them all up here for visits of several days or a quick over night. It makes holidays delightful and busy. New housing has skyrocketed, and our 35 year old house offers us more than any new place. Besides, it is almost paid off.

If your kids are having families now or soon, this extra room will allow for easy visits in the future.


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RE: Are we crazy to consider this?

Read up on why Chase is dumping "FHA"-sponsored mortgages... Has to do with ave time to unload a bank-owned house (something like 547 months).

Short-sale, maybe not as long? I'd tip my hat in the direction of the kids and/or bank, but if it is tied up until the owner is "gone" (deceased) it might take a long time. And, I'd definitely get an appraisal. I'd also look at getting the county to reconsider the taxation before I purchased it.


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RE: Are we crazy to consider this?

More detective work, courtesy of the assessor's office:
Built in 1935
1801 sf + basement
Last purchased in 1996 for $87,900
Assessed value: $37,000
Market value rule of thumb: 3 x assessment = $111,000

That's $61/sf, which is in the ballpark for a fixed up house in this vintage/neighborhood. I just don't know if the neighborhood would support that absolute dollar amount. A couple nice houses in the $100K range in the area have sat for months. I need to get more "what's sold in the neighborhood" info.


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RE: Are we crazy to consider this?

P.S. We're not in a hurry by any means (one of our reservations is that we're not ready to start another reno), so I wouldn't mind if the short sale took a year. We'd just like to be first in line and get a great deal on it.

Here are some photos of the exterior.


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RE: Are we crazy to consider this?

More findings: there are actually several homes in the neighborhood that are on the larger side, have bigger lots and/or are newer (i.e., 70's vintage) that have sold in the past few years. So I'm much more comfortable with a house with a 100K+ potential.

Update: the owner has a realtor they had been talking to, so it looks like they're going to list with her. I talked with her tonight and asked her for details (square footage, asking price, whether it had a mortgage, etc.) and she didn't know. Said she'd try to get to the courthouse tomorrow or Monday and look it up. I didn't tell her I'd already been there and done that. :-)

So, realtors, am I thinking correctly if I assume that this agent would be motivated to make a quick deal work with us (and get both sides of the deal) before listing it and giving up half the commission? And methinks it's also a plus to have a realtor working a short sale with the bank? Though perhaps not so much if she's not experienced with short sales?

Any further advice on how to play this?


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RE: Are we crazy to consider this?

How long will you stay in this area before your next move?


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RE: Are we crazy to consider this?

azmom: I have no idea. I own a business here (which is what brought us here initially), so not likely anytime soon.


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RE: Are we crazy to consider this?

Weedy,

Years ago we found a perfect house, in a small town of the best school district. We were about to make an offer then we learned that we had to relocate.

That was a terrible company relocation for many colleagues. In a small town when a major employer leaves, the local housing market tanks.

We heard plenty stories from friends who had to take loss in similar situations.

This won't be your concern; since as a business owner you have more control of your future than being an employee.


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