Selling a half flipped house?

Question

Hey everyone, I'm new here and have been pouring over all the forums. Definitely wish I found BP about three years ago before I dug myself into a big hole. Long story short, I purchased a charming victorian in Buffalo, NY that has turned into a nightmare money pit. My intention in purchasing was to brrrr, but after a multitude of unexpected expenses (including an electrical fire) and a contractor that abandoned the job I am absolutely tapped out of funds. Most of the structural work on the home is finished, but all of the finish work needs to be completed as well as some electrical work that I'm not sure will pass inspection.

Should I just sell and take the loss? Are there options for having an outside investor finance the rehab and then split the profit if I sell or hold and rent?

If I do sell what is the best approach (e.g. through and agent or cash deal)?  I'm feeling super lost right now and so many mixed emotions after three years of blood sweat and tears trying to get this place up and running. Any and all advice is appreciated.

Chris Seveney · Answer

@Anneliese Kvashay

You will have to take the emotions out of it and look to sell it. List it with an agent who deals with REO’s and these types of

Properties

It will probably go as cash deal. Also list it on BiggerPockets since it’s free and maybe get someone interested.

Bruce Woodruff · Answer

I work with @Matthew Irish-Jones, who is a Buffalo local Contr and RE guy. He might be able to help you, they have a construction team in-house and do a lot of remodel work.

Eliott Elias · Answer

The biggest waste seems to be time. Not looking at the numbers, I would sell it for a loss and make up for it via other projects ASAP.

Bruce Woodruff · Answer

Great take as usual, Patricia!

Matthew Irish-Jones · Answer

HI Anneliese,

Sorry this happened to you, but its not uncommon so keep your chin up.  I have been here and done this more than once.  You would think I would have learned the first time, but sometimes the idea of the opportunity blurs the clarity of the risk.

Here are some options:

1. Yes you can have the rest of the rehab financed.  Some construction companies offer financing, I know ours does.  It comes with a cost though.  Its a a high rate, and you are once again compounding your risk.   If you are already underwater this could just add to your losses.

2. I have to assume without asking a ton of questions this is probably best to sell off market.  Without getting too much into the weeds, you need a permit for everything in this town.  If work was done without it from a questionable contractor you are going to have to discount the price for someone to take on the risk.

The asset itself is probably going to make this decision for you.  If the work done by the contractor was not permitted, structural work that was not permitted, no asbestos test, lead test, building permit, etc, etc.... you are going to need to sell at a loss to just get out of it.

If you really are at the finish line and someone just needs to put the finishing touches on, you can explore financing the rehab, or trying to sell at break even or maybe a slight loss.

We know the Buffalo area well.  Feel free to shoot me a DM if you want to talk this through.

Thomas Latuga · Answer

@Matthew Irish-Jones - could use your input, please

Thomas Latuga · Answer

@Anneliese Kvashay you need to consult with two major players in the area (in no particular order) - James Wangelin (https://www.biggerpockets.com/...) but he's not active on BP forum, and @Matthew Irish-Jones (https://www.biggerpockets.com/..).  They both run major brokerages and have construction teams.  They should be able to provide indepth knowledge of how to handle the situation.

Anneliese Kvashay · Answer

That's a really great way of looking at it. I appreciate your take

Peter Mckernan · Answer

I would go back get those documents and see if you can recoup some money, it needs to be before you sell so if you can hold it. I would say that would give you some juice to fix it up and get it sold for sure! Maybe you get $40K from insurance and then you only have to put out $100K (this is an example). That means you would reduce your expenses and then put in $100K, let's say it is worth $200K then selling it for $400K, you could recoup the cash and maybe make a little bit with selling fees about $25Kish.

Patricia Steiner · Answer

I live in a historical home.  1925.  Great year for wine - and let's leave it there.  These are money pits and time takers.  And, there comes a time when you have to realize this:  Every owner takes a house to the next level.  So stop and look at where you have taken the house during your ownership.  I bet it's farther than you think.  And, it's most likely time to let the next owner - who hasn't had to live through what you have so far - start his/her stab at taking it further.  These don't get rehabbed quickly...I'm in 20 years and amazed at what it takes on a routine and regular basis.  Being on the national registry makes it even worse. Nothing like old and regulated to ruin a perfectly good day.

So, take inventory of where you started and where you are and take pride in that.  And, sell it.  There's another you, another me out there.  Go find your buyer.  It will be easier than you think.

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Selling a half flipped house?

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