1st rental property in very bad shape.

[Brad Armel]

I recently inherited a house in Daytona beach that is 884sq ft, wooden frame, with a leaking roof, rotting wood frame and T1-11, the floors are sagging pretty dramatically as well. I initially thought I could reframe the foundation and rebuild up (walls, windows, doors, ceiling, roof) the more I analyze the project the more confused I get about the direction to go. Pour a slab, modular home, or just stick with the wood frame foundation idea? I know modular homes don't add any real long term value and our goal is to make this and rental property we can hold long term. This is our first rental property and being confident in a direction would make this whole process much easier. Any advise would be much appreciated. Thanks.

[Ron Flatt]

Congrads, starting with zero debt on a property is great.  

1st)  Many folks let emotion get in the way of the right move.  Just because you inherited does not mean you have to keep it.  It was given to you to use.  I have rentals, that I expect my wife to get rid of, if I were to pass away.  (I am not afraid to go there, but it is dealing in an area that I am uncomfortable with my wife going into).

2nd) I would do a thorough cleaning, as mentioned previously removing debris and general cleanup will help the property tremendously.  

3rd) Get a reliable contractor to bid the job.  (Note this is easier said than done, as stated up).  If you are comfortable I would recommend starting at the bottom. 

4th)  Depending on your situation, I had a friend who sold their home thinking they would buy something different.  Their home did sell, but they still had too much debt for the bank and have not been able to buy what they are looking for.  He is living in one of his rentals and it is causing marital problems.  My point is that if you sell, will you be able to get a loan to buy what works for you.  

A note:  I bought a property for $500 on tax sale, after looking at the cost to rehab it.  I spent $5500 on a demolition and then sold the lot for $9000.  It was the best use of my time and money.  Evaluate what you will have in then end, it may be better to sell it then purchase something else. 

I have bought some rough properties that were not up to a standard I was comfortable with, but already had tenants.  I took care of small items but did no major renovations until they moved.  I have one that is working on year 3, but the tenant is so happy that I got her plumbing working, a new fridge, and insulated the attic, she signed the 3rd lease even though rent went up again.  It is the relationship, she knows I fix it if it is broken and when I have extra from another job and maintenance man is needing something to do, he works on her property.  So if you already have a tenant it is something to consider.  

Finally, You are in a great spot, but you need to look at your options.  Clean it up and keep it rented.  clean it up and sell it (will you be able to buy something else), partial reno. and sell, full reno and sell, or full renovation and rent.  

Good luck to you.  Again, unless the property is sitting on the ground, do not let a pier and beam structure scare you.  I am a big guy so I need a little more room under a house, but I still go under them, (if they do not have nice hard wood floors sometimes I cut holes through the floor to give more access).