Note Date 20170209 - Adam Adams
Today was going to be a slow day, but I've been running at 60MPH since I got up. To trust a vendor you have never used before is hard to do. I bought a duplex in NE Ohio. We got it on the cheap and the BPOs came back with values in the 60+ range. However, before we took the property, I had a conversation with code compliance. Turns out that building had to be converted back to a single family. Doh.. There go my rents that I had planned. Next she tells me that the garage is unsafe and has to come down. Since it was an unfinished garage, I was thinking that it might be cheaper to tear it down than to finish the building, so I'm OK with that. Except turns out that all single family buildings have to have a garage. So I have to tear it down and build a new one. Doh. I can still make some money. And in the opinion of my GC, I can still it as is for $25k. I can still make a buck or two on this deal.
We finally get the non-paying borrowers out of the building this month. There were some cops involved, a warrant executed by code compliance, threats of arrest, fines being waived about. But we got it all settled and I made a new friend in Code Enforcement. Then we (my GC and his video camera) take the tour. Turns out they were hoarders and they destroyed the inside of the property. So much for exterior BPOs, eh. So much for $25k As-Is, too. I'll be lucky to keep my shirt on now. My GC offers me a way out though. One of his guys is willing to pay $14k for the property. Actually, he'll pay me some of it and we'll create a note for the rest. So the guy who tells me doom and gloom has now offered me a way out. Is he scamming me or is he telling me the truth. This is the tough part of the business for sure and it seems to come up a lot. In the immortal words of Ronald Reagan, Trust but verify. Well since I made a friend with Code Enforment, I called her up and told her what was going on. She told me that my GC was in the ballpark with his costs and it would be pretty tight for me to make any money if I renovated it.
OK, so do I now sell to this other guy for $14k? He's not really capable of fixing it as someone with some capital can. It seems like I'd be creating another situation of a house with severe code violations was going to be "fixed" over time and not really get fixed. The city inspector agreed. Fortunately, she tells me that the neighbors want to buy the property. Their plan is to flatten it. I'm actually kind of excited about it. I might lose some money on the deal, but it looks like I've got a friend in the right place in that area, plus it looks like my GC was being square with me as well. Time to find another property.