This house's entire back (brick) wall fell down. Should I buy it?

[Kerrick Long]

I was doing some research on houses of a very specific architectural style in my neighborhood. I found an abandoned property that would make a great BRRRR 4-plex, and the only thing I could see from the outside was that it had what looked to my untrained eye like foundation problems.

I left a note with the owner, and he reached back out to me a couple weeks later and said he's willing to talk -- because the entire back wall fell out. This almost scared me away from buying it, but I decided to keep talking.

The owner got two estimates for brick repair (foundation work NOT included), one for 17k and another for 23k. (However, historic district requirements in the area may allow me to replace the wall with vinyl siding, since it's not a public facade.) He's now asking me to make him an offer on the house. I'm brand new at this; I've never messed with REI or renovations in my life. In fact, I'm not even handy; I couldn't patch a hole in drywall if you asked me to.

I still love the idea of buying the place, hiring a structural engineer to fix the foundation and any other structural issues, hiring a design/build firm to take it down to the brick and build it back from scratch, live in one of the units, and rent the other 3. I'm already qualified for a renovation loan. But at this point, I have no idea what the rehab costs would be, or what a fair offer on the house would be.

The numbers I know:

• A similarly-sized empty lot in the same neighborhood can be bought from the city for just under $17,000.
• Rents in the neighborhood have a "u-shaped" graph: $600-800/mo for the crappy ones, and $1300+ for the recently-renovated ones.
• SFHs in the area sell for $120k-200k un-renovated, or $250k-350k renovated. The past five years have seen a huge boom in the number of renovations and gut rehabs in the neighborhood.
• The SFH next door (under half the size of this) sold last summer for $124k, move-in ready but not recently renovated.

My questions:

1. What is a fair offer for this property?
2. What would be a ballpark for my all-in cost for gut rehabbing this property?

[Greg Scott]

Kerrick:

Based on the information in your post, I would strongly suggest you walk away.   A falling-down, abandoned property in a historic district is a highly complicated project.  Of course if you are independently wealthy and just looking for a hobby, go for it.  Otherwise you are likely to lose a lot of money and time.

I'd encourage you to get experience on much simpler projects.  Consider buying an average-condition single family rent property a stable area.  See what it takes to manage it when it needs repairs or rehab.  Work your way up to a project like the one in your post.

Good luck