Investor · Queens, NY · Member since 2016 · 63 posts · 22 votes
Hello BP community,
I am looking to invest in a property out of state but I will be moving into it for grad school. This would be my first property that I buy sight unseen. It is an REO and I have not yet had it inspected. I just learned that it might have had some damage to the foundation. There was a flood in September 2011 and the water had not been on since October 2011. The house has also been vacant since then. Apparently, the water level was so high, it went over the levee's and flooded the area of the house.
I am under an as-is contract with the bank. I still have twelve days for the inspection but I don't know if it is worth it.
Another issue is insurance, my realtor quoted $302/year for insurance. Which seems low to me. But because the house is less under $50,000, the insurance rate is lower?
The inspector would confirm whether there was foundation damage. What do ya'll think? Is it worth it to get the inspector to check it out or should I run?
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
Absolutely crazy. The insurance quote was probably for flood insurance, which is required if you use a bank to finance this. What is your exit strategy? Who will want to buy this from you in the future?
Why do you think a local investor has not bought this property in 6 years? Because it isn't worth it. If you can't pay cash for this thing, I definitely wouldn't buy it. Invest what you can afford to lose on this.
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
Absolutely crazy. The insurance quote was probably for flood insurance, which is required if you use a bank to finance this. What is your exit strategy? Who will want to buy this from you in the future?
Why do you think a local investor has not bought this property in 6 years? Because it isn't worth it. If you can't pay cash for this thing, I definitely wouldn't buy it. Invest what you can afford to lose on this.
Investor · Chicago , IL · Member since 2014 · 159 posts · 68 votes
9y
If it has this many issues up front, unless you're getting this property for next to nothing, I would probably walk on the deal. You'll likely find plumbing issues since the property was vacant for so long. Unless you know exactly what you're getting into, I would walk away. It sounds like a money pit.
Investor · Queens, NY · Member since 2016 · 63 posts · 22 votes
9y
@Anthony Dooley I will be buying the property cash. I want to buy and hold the property. My strategy is to hold onto it until the area develops. It is in a college town and the locals are trying to develop that area. BAE will be moving in the next few years. Noted, if an investor has not already bought it...there are probably much larger issues.
@Christopher Salazar Houses in the area average $50,000. I will be buying it $35,500. Yeah, they mentioned that a plumber would have to be there if there are any plumbing issues.
Investor · Jackson, TN · Member since 2013 · 25 posts · 8 votes
9y
35.5 isn't cheap enough. If it's been vacant that long, you can expect to have all sorts of issues, from plumbing pipes and bad seals in every fixture to Mother Nature types of pests and termites.
Investor · Fort Lauderdale, FL · Member since 2012 · 16 posts · 4 votes
9y
YES YES get that inspection it will be worth every penny, then you can do the math based on the estimates from the inspector and other things that you want to do . House 35k + inspection report 15k =50k personal cosmetic changes 30k we're 80k in at this point, misc 10% 8k total 88k Appraisal with repairs 230k -88k - 142k Same house with lower appraisals makes a difference. App 98k - 88k only 10k in sweat equity no worth it for me.
So you really have to know the numbers but yes spend a few hundred for a inspection.
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
I would be willing to bet that you can get a similar property that is in better condition, for about the same price. If BAE moves there and development happens, that is great, but that is speculation at this point. Speculation is not investing. You are buying it based on it's value today. You can improve the value of the property, but have you looked at the ARV? Can you buy a property for $45K in the same town that is actually in livable condition? I'll be you can. It's going to cost $20K to fix this house without even looking at it. Keep looking.
Investor · Queens, NY · Member since 2016 · 63 posts · 22 votes
9y
@Justin H. You were right! The agent told me a plumber would have to be present when they turn the water on. She also said I would only have to pay him if there were necessary repairs, well I have decided not to take on that risk. @Marlene D'Souza
@Marlene D'Souza usually the inspection is worth it but after digging a bit deeper, I don't think it is worth it to invest in the property. Since there is potential foundation issues, I would need a structural engineer to evaluate it; A local engineer quoted me $1200 and that does not include fixing anything. As a newbie with limited experience with out of state investing, this thing started to look like a money pit.
@Anthony Dooley Yes, you are correct! I can find much better properties that were not flooded and are not in a flood zone. Thank you for your advice. I have decided to keep looking and get my EMD back.
Thank you to everyone who contributed! I appreciate it and ya'll saved me from a potentially $50K disaster.
Investor · Queens, NY · Member since 2016 · 63 posts · 22 votes
9y
Thanks @Vonetta Booker. It has been quite a stress relief to forget about that property. But I am also worried about finding something else in a timely manner.
Princeton, KS · Member since 2014 · 357 posts · 169 votes
9y
For future consideration: If you even suspect foundation issues, you'll need to really pin down your numbers BEFORE you commit to anything. If you're dead set on buying the property, get a contractor experienced in foundation repair (not just an inspector) to assess/bid on it. Their bid alone may change your mind!
There's a house in this town that is completely off the foundation on one side. (I've checked it out!) In the last two years, it's sold twice. No work done - back on the market a third time. I ran the numbers - it's not even worth tearing down!
I honestly wonder if these people have eyes to see with. Obviously they have more money than sense. Looks like you dodged that bullet - good luck!