Would you buy a property next to a condemnable building?

[Sean Tyler]

The property is within walking distance to The University of Pittsburgh, and with 20% ($40k) down, it cash flows at $700 per month. Based on my analysis using the BiggerPockets calculator it makes sense, however there are some concerns I have with the property.

1. Minor concern - I cannot see the second unit until after I make an offer; current tenant is scared of COVID-19 and won't allow people into the house. However, I would be able to see it once it's under contract. My realtor said I could make an offer with the contingency to back out at anytime based on inspection of the second property. I have been able to see a 3D walkthrough of the house and it looks to be in good shape. Both units were rehabbed and the current owner bought them a few years ago; I'm assuming it was a BRRRR and now they're selling. At the end of the day, this seems to be a minor issue as I could always back out if there was a big issue with the second unit.

2. This is my bigger concern - next to this property is a large, 4 unit, vacant property that looks like it’s condemned. There’s no paperwork outside stating that it’s condemned, but it’s in bad shape. The front porch of the unit right next to the property I’m interested in is held up by beams that were recently put in to prevent it from collapsing. All in all it’s an eyesore and I could only assume it would cost close to $1/2 million to purchase the property and rehab it, which is money I don’t have at the moment, but could be a potential investment down the road.

Anyhow, my question is - does this sound like something worth investing in, or does the condemned building next door pose enough potential issues to stay away from it and continue looking for better properties.

I’m new here so if there’s anything I’m missing or not thinking about feel free to clue me in; any insight or guidance would be greatly appreciated. Thanks a bunch.

[Heath Ryans]

@Sean Tyler If the deal makes sense and it's in an otherwise good, safe neighborhood, then go for it. If the building is that concerning, build a fence so your tenants don't have to see it. Then see if you can find a partner to help you take it down and fix it. 

Also, you're saying that that property generates a 21% CoC return and I find that hard to believe unless your implementing a substantial value add plan. I would be happy to review the analysis with you if you are unsure of it. Unless you are talking about producing an $8,400 NOI and not necessarily true cashflow.