irreparable investment property?

Question

Looking at this 4-unit in Miami, Florida (see pictures). Both homes need an unbelievable amount of money and work put into them. Looks like part of the roof has a problem and even a hole in the side of the property as seen in the pictures. It was build in early 1960s and wood frame. My question is, can something like this be fixed or is it best to leave alone--and ostensibly demolished at some point? Any insight on these types of situations would be greatly appreciated. Thanks everyone.

Gabriel Amedee · Answer

Hey @Gavin G. ! What is your investment experience? I believe that is what will determine your answer. I've "fixed" many homes that others have perceived as needing a demolition. The pictures above don't cause any form of intimidation in my perspective. If you can identify what the property needs in order to be restored then you can calculate the price you need to purchase it for in order to make sense. I do factor in a higher return for these more intensive projects but I can't dismiss them when I'll get a much higher return than the easier projects on the market. Hope this helps. Happy investing!

John Teachout · Answer

And speaking of asbestos, the type of siding on that house may contain that. It may or may not be an issue depending on the municipality.

Nathan Gesner · Answer

The margins can be better in a property with deferred maintenance...but only if you buy it for the right price and know what you're doing when it comes to renovations. Last year I helped an investor buy a property for $200,000 that needed new roofs, windows, doors, paint, flooring, heaters, water heaters, etc. They were a complete mess and everyone in town knew it. But I saw the potential and reached out to the owner to see if they would sell. They agreed to sell them, my buyer bought them, and he put about $150,000 into them. He's $350,000 in and the property is now worth around $800,000.But that doesn't mean that every dilapidated property can be doubled in value. You've got to do the homework.

Gavin G. · Answer

@Nathan G. Thank you for clarifying. Being a finance savvy guy I just felt that the margins would be better in these kinds of projects. Been following the mantra “look for distress”

Nathan Gesner · Answer

@Gavin G. I'm not saying you shouldn't invest. I'm saying you shouldn't invest in a major fixer-upper like this.if you were experienced and qualified to purchase something like this, you would already know (generally) if it's worth the price / trouble.What would happen if we all told you to go for it and then you jump into it and find out it's a complete tear-down? Full of termites? A former meth lab with asbestos and lead paint? What if your amateur guess is that it will cost you $75,000 to renovate and it ends up taking $150,000?This is a major project that requires a certain level of expertise. Stick with things you can manage like cosmetic renovations involving carpet, paint, etc.

Gavin G. · Answer

@Nathan G. How does one start then? I think I'd ask the question on every property. Nothing in real estate is my "bag". Where did you start?

Nathan Gesner · Answer

If you have to ask the question, it's not your bag and you should walk away.

Theresa Harris · Answer

I think you meant to tag @Gavin G.

Kerry Baird · Answer

I have done a similar renovation. We had termites...look at my personal blog. Tents for termites cost $3000 alone. We did hardie cement board siding to replace the wood siding. Had to replace a section of wall that was eaten. Look for straight ridge at roof, straight level floors, no piles of “sawdust” or wings from termites. We replaced some plumbing, added new kitchen. Doors were a different size than common today, so we had to add new headers and replace old doors with new. We had to replace electrical panels and rewire due to twisted aluminum and copper, plus had to replace the old Federal Pacific panels, at $3k for the panel and similar price for rewire. That kind of panel was used in the 1960s. We replaced broken windows, put in expensive hurricane grade windows, which you might not do. We did some work ourselves, and hired out for most...structural, siding, kitchen, windows, electrical.

Glidden Rivera · Answer

@Theresa HarrisYou are In Miami, so the answer is probably yes it is worth fixing. A quad in the ghetto is still worth 400k. You need to know the area.You need a real assessment of damage.You need to buy it rightYou need to make sure you have the finances lined up.Hard money with acquisition and rehab.This doesn’t look like a beginner deal though. That said, lock it up under assignable contract and wholesale for quick cash.