Salt Lake City, Utah first home under contract

[Christian Kenworthy]

Hello BP! I have my first home under contract. It's a 6/2 duplex that resides in Sugar House, Salt Lake City, Utah. I could really use some input on if this is a real deal, if it's workable, or if it's going to be a real headache. I was able to pick it up for about 260k, It seems there'd be a lot of potential seeing 3/2 across the street recently sold for 310k and i'm looking at an ARV of 400k. Here are some issues with the property:

1. there's a slab leak in the basement, they say it's due to river that runs underneath the homes on this street and is fixable with a sump pump. (they quoted me at 10k, is that normal?) ( Also could this mean there's a foundations issue?)

2. There was a good amount of mold in the basement that they're working on getting out before closing.

3. Lead based paint. ($5000?)

4. Also some switches don't work and they quoted us at about $12,000 for the electrical.

5. Everything else seems pretty cosmetic. ( kitchen updates, drywall and paint is some areas, and laminate flooring.)

The original homeowner says he doesn't have time to fix up the property but my guess is he ran out of money.

Originally I was planning on using an FHA for financing but with the newfound repairs i'm looking into getting a standard 203k if possible. What do you guys think? Would you like to see some pictures? Should I cancel the contract and keep looking? renegotiate? Some input would be great, thanks BP!

[Becca Summers]

Because the dulpex is older than 1977 it probably has lead based paint, but that is true for everything that old. If the property has been painted the lead based paint should be encapsulated. The concern for lead based paint is two things, one when doing renovations you'll be exposed and two if there is ever any chipping paint and a tenants child eats it. If you keep your property in good repair and let the tenants know about the lead based paint your fine. There is a little booklet your supposed to give all your tenants if you move forward. I can give it to you if you'd like.

Sump pumps are not ideal because if they fail you get water in the basement, they have to be well maintained. You can look into foundation issues, if it has them there are clear signs like settling, windows that are no longer straight and doors not closing properly. 

Mold, if you move forward as for it to be taken care of fully or ask a price discount.

Some switches for $12,000 is way to high. I just negotiated for the seller to pay for my buyer to have a 1935 house rewired and that cost was $6,000 and it was a lot of extra work, the bid was $4,000.

In sugar house doing the nicer renovations will get you closer to the $400k ARV and it's the type of neighborhood where tenants appreciate the extra nice finishes I don't know if laminate flooring is the right way to go.

The numbers don't work for a flip $400,000 ARV *.75=300,000 which would mean your renovation costs would need to be $40k for both units and I think that is pushing it to do two kitchens and two bathrooms. If your looking for a nice buy and hold that will have some equity once your done that might be the route. From the sound of it there is no way this property will go traditional FHA financing. (The house has to qualify for the loan also) Hard money or private money is the route I would go if I where you.

I don't think I'd walk from this just yet, get better bids and find out if you can get the financing. It has a lot of potential.