Newbie investor – stuck with an over leveraged rehab property


You must be logged in to reply to this topic.

Viewing 6 posts - 1 through 6 (of 6 total)
  • Posts
  • I saw an ad from a Seller on a public forum, approached the seller to understand the situation, only to end up becoming the investor’s guide. He is in a fix now, no thanks to his realtor.

    THE SITUATION:
    10,,800 sq.fr corner lot facing a heavily trafficked, and noisy street.
    4/3/2 with a very strange floor plan
    MIL suite: 1/1

    Buying Price: $167k
    Lender’s fees:$12k
    Rehab cost: $100k
    All in TOTAL: $279k
    Selling for: $339k

    Realtor’s cost: $20,340
    Property taxes for last year: $8400
    Closing costs: $7500
    Holding cost: $2500/month

    The realtor placed the house on the MLS, 2 months before the rehab was completed against the investor’s wishes. Appraisal came at $340k
    Realtor’s 1st placement: $369k
    Dropped to: $347,900
    Now:$339k – 2nd cut in 2 months

    3 open houses, lots of interest, nobody made any offers. 1 family became interested when the investor offered Seller financing upon my suggestion. They later backed out.

    Now I am suggesting to him to conduct a Highest Bidder Sale He should choose if he wants to do it for the highest down payment, or the lowest he can accept without losing any more money. He asked me to ask my investors if they will take it off his hands for 279k. I told him to do the HBS first. It will buy him time to cancel the realtor’s agreement too. He realtor wanted a commission of 6% from the owner finance couple this investor found himself.
    Doing the HBS, he can get the maximum boots through the door, start building his own buyers list, gain experience, and control his own marketing for maximum effect. If it does not produce the result he wants, we can always seek out the other investor’s. Rental will not bring in more than 2200 in the area.

    Any other suggestions?

    all the marketing in the world will not fix a “heavily traffic and noisy road” or an area with high crime.

    The investor bought in the WRONG place. She/He needs to be prepared to take a substantial haircut to sell this house.

    Even at a deep discount, you don’t want this house unless it could be converted to a commercial property where the high traffic would be a plus.

    Sometimes what seems like a “deal
    is not a deal at all when you take in to consideration all the other factors.

    This is another situation where wholesaling the property would have been a MUCH better option than doing a $100,000 rehab project + all the holding costs.

    This investor just got a very expensive and stressful seminar.

    I 1000% agree with you, Jackie. Sometimes a deal is definitely not a deal when you look at the bigger picture. This was certainly a very expensive 100k + lesson the investor had to learn.

    He bought high, spent a lot on all the wrong items, but most importantly it is in a noisy and high traffic area- a no-no for a residential property, but a big yes for a commercial property. Unfortunately, the HOA refused his request to apply for a zone change to the city; it is in their by-laws. His break even is 279k, so his best bet is to look for a credit impaired, or no-credit, but good income family trying to buy with a good down payment. Poor guy cannot even put a privacy fence in the front because of the lot’s street corner position, and the stop sign.

    Don’t make his problem your problem. PASS

    Jackie, just another thought on this property since the owner contacted me again for my help.

    Can this 5 bedroom structure be turned into an assisted living? Would that be considered a commercial enterprise, or is it still considered residential in a residential subdivision?

    I am asking since I have read so often people buying regular houses in neighborhoods and converting them to assisted liv No spaces.

    .
    There’s a long discussion about such a conversion in the Dallas, TX area:

    https://www.trulia.com/voices/In_My_Neighborhood/Single_Family_Home_bought_and_Flipped_to_Assisted-403925

    Some excerpts:

    (per Texas State law — Texas Human Resource Code , Title 8, Chapter 123):
    Sec. 123.008. LOCATION REQUIREMENT. A community home may not be established within one-half mile of an existing community home.”

    and this excerpt (since I recall a long time ago the claim that the federal 1988 Fair Housing Act overrode any state or local zoning issues:

    “The City of Dallas has been using the Fair Housing Act of 1988 as an excuse to permit these businesses in Single Family Zoned Neighborhoods.
    The DoJ and Hud released a clarification document stating that the 1988 Act does not pre-empt local zoning laws.”

    It also appears that what local zoning laws or local codes say, and what some city council members are willing to enforce may be two opposing things.

    Ayesha, you didn’t mention whether this property is in the DFW area. (You could have been contacted from any state and city in the country.) It appears that you might benefit from some legal advice relevant to whatever city and state has the property, and maybe some current research on what laws or zoning rules are actually being enforced. Some places are “very political” about who they enforce laws against, and for who they “look the other way.”

    Good luck on what you find to be the local reality.

    –Dee

    .

Viewing 6 posts - 1 through 6 (of 6 total)

You must be logged in to reply to this topic.