Creative Deal Structure Game – Crack House


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  • I think I’ve experienced just about any kind of crazy real estate deal there is. Some of the most disgusting were crack houses.

    This week’s creative deal structure game might have you running for the hills… or would you take it on??

    Landlord calls. His tenants moved out last month without paying rent for 4 months. He just went to check on the house to determine what needs to be done to get it ready to rent again. It’s in a lower-income area but many of the houses on the street are well maintained with pride of ownership. Some of the houses are really run down and appear vacant.

    Sadly, he found that the house has been taken over by drug addicts/homeless people.. The front door is gone. There are people passed out all over the place – some in their own urine. Hypodermic needles were on the ground everywhere. There were starved dead dogs who had been tied up in the backyard with fleas swarming. Trash was everywhere. Some people had set up tents in the backyard because the house was full. The house smelled so bad he thought he was going to throw up.

    He got in his truck to call the police. They said they can’t do anything he would have to file an eviction. Unfortunately, the house is in a town where homeless people seem to have more rights than tax-paying citizens. It’s kind of hard to file an eviction when you don’t have a lease with squatters.

    As he was driving home, he saw your “We Buy Houses” sign at the end of the street. He calls to tell you about the sad situation with his property and asks what you will give him for it.

    If the house were in great condition, it would be worth about $90,000. There is no mortgage.

    What would you do? Remember, there is no one right answer.

    Would you pass?
    Would you get an option to then wholesale it?
    Would you fix it up them keep it as a rental?
    Would you fix it up then sell it?
    Other???

    • This topic was modified 1 week, 3 days ago by Jackie Lange.

    At the end of the week, I’ll tell you what I did when I got a similar real estate opportunity

    Jackie,

    I look forward to your answer.

    I bought a confirmed crackhouse before they were being labeled in Oregon. The gentleman that told me what I had bought was perhaps one of the occupants??

    It was living across the Street the house was in pretty good shape. It was a fantastic neighborhood and although I closed a title company I remembered that made the major mistake of trusting another investor and his escrow agent.

    I won’t spoil this for everyone else, but I can tell you before dealing with a methamphetamine lab, perhaps it’s gotten easier over the last 7 years, but the potential liability would be far too great for me.

    With no debt service. This would be an outstanding time for me to step in and step up to the plate and work with an option to obtain the property and in doing so I would probably use an out-of-state limited liability company. As the trustee for my trust that I would ultimately hold title in. I say that because I would not want to have any potential opportunity for the government. The city or the end purchaser to be able to figure out who I was where I came from and what I was aware of.

    Thank you for sharing

    Note, with a transaction that I did. I told the title company you close this deal and there will be a very good invitation sent to you in the event I don’t receive 100% of my proceeds that you received from me to close this transaction, and you’ll be front and center in the lawsuit. And you’ll get all kinds of media attention and hype.

    Without hesitation they refunded my money and the gentleman who lined up the transaction was willing to walk away also.

    Pretty interesting, I And I on the property because I owned other properties in that area and lo and behold it was ultimately sold by a state Corporation!

    I wasn’t brave enough to put my stamp anywhere near it.

    When the gentleman came to the house and told me that was a drug lab for methamphetamine, that made the hair on my back stand!

    I’m still not thoroughly convinced that’s why I didn’t turn gray at the young age-LOL

    Dan Butler . Portland Oregon

    They are NOT making drugs at the house. They are just using drugs while they are crashed at the house.

    Thought that info would be important in your decision.

    I believe I would approach it this way… I would make sure this is a situation that the owner does not want to deal with. and so I can get a great deal for taking on the challenge. Once I have a great price locked down, I would wholesale it and explain to the potential buyers what is going on and I am sure there will be one or two that have dealt with these kind of situations and make a quick $5K to $10k.

    This is a monumental challenge. The major focus for me is to prevent further blight, as this destroys the value of all the surrounding properties. This is a process that the numbers, the amount of red tape involved in dealing with the county, and time all have to be addressed first.
    These are the stages
    1. Acquistion,
    2. Demolition,
    3. Reconstruction,
    4. Disposition.

    We must account for all costs associated with buying this distressed property. The numbers have to work.
    Any squatters must abandon the property peacefully. Police involvement is not usually an option and requires dealing with the people issue through seeking help from non profits to provide alternatives for the people dealing with the addiction. Eliminate the property at its core, demolish it to the raw land to allow a pathway to rebuilding.

    With addiction, removing the people is primary. Bringing the property back to the studs will help, but you still have associated costs and permits. Land is simpler to control while we worked all the details out.

    I hope this helps.

    ButlerKenneth,

    With our new administration, I think will see strengthening of the DEQ and for anyone who hasn’t dealt with them I sure have.

    I believe that short and sweet. I appreciate your input and I would like to say that I have dealt with DEQ and they are not friendly and they are certainly not cheap!

    Please make sure that you cover your bases!

    Remember that flushing drugs down the toilet is popular for those who are trying to evade the law! And usually those go into the sewer system??

    Depending on your location it can make a difference in how many people might be chasing you later.

    Everyone should cover their bases and their assets!

    Staying safe while helping somebody else with an issue should be the main goal thanks for your ideas,

    Dan

    I would tie it up and wholesale also.

    This is what I did when I got the call and saw the crack house.

    I asked the owner “what’s the least you’d take to get cash for the house next week?”

    He said he’d take $8,000!

    (Remember, it’s better NOT to make an offer – just ask people what they will take! You’ll be surprised how little people will take to make a problem go away)

    I wrote a contact that day — with a stipulation that I could secure the property the day the contacts was signed.

    I contacted a rehabber friend who lived not far from the house. Told him I’d assign my contract for $5000 if he’d meet me at the property that afternoon with a lot of plywood to secure the property.

    Remember, this is a $90,000 house when all fixed up. He did not care that I was making $5000 for finding the opportunity.

    We agreed to meet at 3pm. I went to Kentucky Friend Chicken to buy 2 big buckets of chicken to take to the property

    I LURED all the people out of the house with the chicken, then my friend, some of his crew, and I border up the windows and doors so the people could not get back in.

    In this case, it is better to assign the contract. I did not want my name or entity name on the chain of title.

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