Part 3: Some notes on real estate ambitions...
Part 2, found here on my old blog…
At one point, I’d given up on trying to get a hold of this house. But, the idea just won’t die. And despite a few people telling me it would definitely be a terrible idea to try and rehab a distressed home, I still think it’s a great opportunity.
Let’s recap…
One of neighbors who lived in a single family home, abandoned their home a few years ago (they’re not totally my neighbors because they don’t live on the same street. But, they live close enough).
I found out that the floors on the second floor of the home are tilting and the wall is separating from the floor.
The foundation might be settling. The home sits on a slope and there is a creek about 30 feet from the house at the bottom of the slope.
That’s all you need to know to understand what a challenge it would be to make this house livable. To make matters worse, the gutters have started to tear away from the house due to rainstorms from over the summer. But, here’s what reignited my interest in the house again…
The house went into foreclosure this year.. I believe this was the first time. The only reason I even found out is because, as I was walking past the property one day, I noticed someone drive by and take photos.
The home was to be auctioned off last week. I actually showed up to the courthouse because I wanted to learn what happens at a foreclosure auction. I also wanted see if anyone would buy the property. But, the home was never presented for auction.
When I got home, I found out the auction had been canceled the day before. Some further investigation and I found out the owner stopped the auction through bankruptcy.
I was elated. Her stopping the foreclosure would buy me more time to research.
So, here are my challenges…
I’ve renovated an entire home before but the renovations weren’t structural. This home has structural damage and that kind of rehabilitation is out of my depth.
I don’t have any professional contacts - no one who works in construction or home renovations who I’ve worked with before and trust. Me, looking for a contractor, would be akin to sending a lamb to slaughter, given how very difficult it can be to find a trustworthy contractor. Being a woman would make me thrice as vulnerable to corruption. I also have no ready team of plumbers or electricians who can do the work at a reasonable cost.
Financing: Let’s say, by some miracle, the bank is willing to sell me the house for $40K. According to my research and estimates, I would need a $70K loan to completely rehabilitate the house and make a decent profit at the sale (given that my estimates on the biggest repairs make sense to begin with. I’ve even included an additional $10K for unforeseen expenses). I wouldn’t be getting a very traditional loan. I’d need a loan to renovate the house. A mortgage lender client of mine said that’s just what the loan would be called (‘renovation loan’). At worst, I’d have to use a hard money lender. $70K is quite a lot to qualify for, though…
The biggest challenge of all: I can’t even begin to research costs or even start recruiting professionals to get estimates until I get photos of the interior. I need to actually get inside the house. Of course, that’s the challenge every home flipper faces with a foreclosure. But, I have a slight advantage because 1) I live 50 feet away from the property and 2) I (sort of) personally know the family who lived there. I nearly got inside the house when the bank’s property management team came to assess the damage on the interior. But, they wouldn’t let me inside.. However, they were the ones who told me about the floors.
I honestly thought I had given up on the idea of investing in this home. When I first got the idea about 2 years ago, I had recently finished an extremely stressful project in real estate. I didn’t want to go down that path again. But, the trauma has since worn off and I’m ready for some more pain. Really, though - isn’t that what home flippers are anyway? Masochists??
Stay tuned for the next episode…