Opinions wanted. Hoarder House... Flip, Wholesale or Hold?

[Jake West]

Purchase price $52,000

Square Feet 1460

Year built 1978

Comps in the area sell between $105,000 (All original) - $145,000 (Completely remodeled

My mother in law recently retired and is in a bad situation. She owes about $47,000 on a house in my local market, Lubbock, TX.

She and her partner are hoarders. On a scale from 1-10 they are definitely a 10.

They recently moved in with their oldest daughter when the pandemic hit and because the house is no longer livable. My wife and I are considering stepping in to help them as well as help our own family. We have had estimates to clean and sanitize for up to $10,000. Once the clean up is complete we will analyze how much repair is needed. We estimate repairs to range from $35,000-$60,000.

The company who gave us estimates to clean, made an offer on the house of $30,000 and say a remodel would cost up to $80,000.

I am curious what you would do and why.

Options:

1.   Clean up the mess and find an investor? Asking price $70k-$78k. Pay mother in law $5k above what is owed. Minus expenses I estimate about $6k-$12k profit
2.   Flip it – Maybe a $10k-$30 profit
3.   Keep it and rent it – Rents for $1,100-$1,200 – House payment of $890-$960

Things to consider:

All renovation money will come from private funding (this would be my first short term flip). I would not be willing to pay a hard money lender considering my inexperience. I am interested in long term and we currently have plans to sell our home in 1-2 years. We have about $150,000 in equity and the plan is to build a 4 plex with our FHA loan. We would live in it for about a year while we build our permanent home.

I am sure there is more pertinent information needed and I’d be happy to elaborate on the details.

So….What would you do and why?

[Account Closed]

Originally posted by @Jake West:

Purchase price $52,000

Square Feet 1460

Year built 1978

Comps in the area sell between $105,000 (All original) - $145,000 (Completely remodeled

My mother in law recently retired and is in a bad situation. She owes about $47,000 on a house in my local market, Lubbock, TX.

She and her partner are hoarders. On a scale from 1-10 they are definitely a 10.

They recently moved in with their oldest daughter when the pandemic hit and because the house is no longer livable. My wife and I are considering stepping in to help them as well as help our own family. We have had estimates to clean and sanitize for up to $10,000. Once the clean up is complete we will analyze how much repair is needed. We estimate repairs to range from $35,000-$60,000.

The company who gave us estimates to clean, made an offer on the house of $30,000 and say a remodel would cost up to $80,000.

I am curious what you would do and why.

Options:

1.   Clean up the mess and find an investor? Asking price $70k-$78k. Pay mother in law $5k above what is owed. Minus expenses I estimate about $6k-$12k profit
2.   Flip it – Maybe a $10k-$30 profit
3.   Keep it and rent it – Rents for $1,100-$1,200 – House payment of $890-$960

Things to consider:

All renovation money will come from private funding (this would be my first short term flip). I would not be willing to pay a hard money lender considering my inexperience. I am interested in long term and we currently have plans to sell our home in 1-2 years. We have about $150,000 in equity and the plan is to build a 4 plex with our FHA loan. We would live in it for about a year while we build our permanent home.

I am sure there is more pertinent information needed and I’d be happy to elaborate on the details.

So….What would you do and why?

I've done a lot of hoarder houses. Yes, there are lots of them out there. Find out how much a 20 yard dumpster is and hire a couple of high school guys to fill it for you. Might take two guys two days. $500 for the dumpster and $500 for the labor, $1,000. That's a whole lot cheaper than $10,000. Then buy some 5 gallon buckets of primer from Home Depot and have the guys give a coat of paint(primer) to everything. Then you can actually see what you are working with and get  sense of what it will look like when it's completed.

Also, take the house Subject To, (take over the loan) give the seller some equity $$$, and if it needs $80,000 of reno on a $145,000 ARV, tell whoever told you that you want him to redo the estimate without the solid gold toilet. A plain porcelain toilet will do.;-) Since you don't mention the scope of work, (roof, termites, AC, water heater, flooring, cabinets, etc) it's hard to get too specific on reno costs. But, I'd guess if I was running the operation it'd be about $15,000 reno for Lubbock for a 1500 sqft in a hoarder neighborhood. You don't put high end design into a property like that especially if it is going to be a rental.

You're on the right track, you've just been talking to the wrong people.