Inherited Property Rehab

[Brian Winters]

Hey All,

I recently found out that I am potentially set to inherit what would be an abandoned house in the Edgewood area of Dayton. I say potentially as it is a long story with a bit of drama, but basically it was my grandfather’s home which we thought for years had been passed to someone else. But to make a long story short, the remaining family in line for it wants nothing to do with it. Since they know that my brother and I are looking to get into real estate, they have said that we can have the property if we want. 

A little bit about myself, I currently own a duplex in Cincinnati that I have been house-hacking for almost five years. I want to get deeper into real estate as that has always been my dream, just never pulled the trigger on any other deals for a nunber of reasons. I have put in offers that have fallen apart, etc...but as of now I have limited experience, especially one what I am thinking would be an extensive rehab.

Now back to the house and situation itself. From what I can see, there are about 20k of back taxes that need to be paid if my brother and I were to take over the house. The house is a one story 2/1 luckily. I say luckily, as it is my understanding those shouldn’t be too costly to rehab compared to other property types. However, at this point I would assume it has probably sat for about 20 years so it would likely need everything (electric, plumbing, etc..). I am hoping for no foundation issues and am planning on driving up to take a look at the house this week or weekend at the latest. From what I can see on google maps, the street itself actually doesn’t look too terrible and the city has been cutting the grass at the property (which they have been charging for). I have family in Dayton, but I don’t have a wealth of knowledge as outside of going to family member’s houses here and there, I don’t know much in depth about the city and its specific neighborhoods.

 My brother and I have proposed going 50/50 on everything and rehabbing; then renting the place out. I currently have about 30k saved up personally. My brother has a few thousand that he was saving for his own home for my understanding as we have spoke about in the months before we even learned of this opportunity. However, I don’t fully know his financial situation and what he is expecting to come out of pocket just yet, so I wont speak to that. I was hoping to come back to him once I get more specifics as he lives in the Atlanta area currently, and Im am the closest again being in Cincinnati.

Questions for anyone with experience in Dayton area rehabs, estate/property transfers, and back taxes:
1) What would you consider a ballpark figure for complete rehab on a 2/1 in Dayton?

2) Am I taking for granted that we would be able to set up some sort of payment plan for the taxes?

3) Around how much should we expect in transfer/title fees to get the house from our relative's name to our LLC (yet to be formed as my brother and I are looking to create a joint one specific to this house)?

4) Do you know anything about the Edgewood neighborhood? Please keep in mind that I am not intimidated by rough neighborhoods at all as long as it is not a complete warzone and/or can’t cashflow.

5) With the back taxes and rehab costs combined, is this even worth undertaking or should we just move on? 

6) Would you have any contractor recommendations for the area?

[Darrin Carey]

@Brian Winters,
Semi Random thoughts and some answers for you.

The county will do formal arrangement to pay back taxes. They will try to limit it to a 3 year plan, but I've gotten them to agree to 4 years. Someone else told my they got a 5 year agreement. Honestly, if you just start paying them, they'll take that too. You can transfer title without having to pay all the back taxes.

Until 18 months ago, the county had a program for investors to get abandoned properties for about $2500. Nobody wanted this one. Of course, in 18 months, the overall market has gone up, and some areas in Edgewood are too. That thought may not be relevant now.

It sounds like the property may need to go through probate to get the title properly in your name. If you do, that may be a couple grand. If it's just a simple transfer/closing that should only be about seven hundred to do it right.

The Edgewood neighborhood can be touchy and goes from block to block. Some blocks are very blighted, some aren't bad at all. Some are actually getting a fair amount of renovation that doesn't show on google streetview yet. (I've funded some of those) I don't consider it a warzone, but the southern end could be close. I know it scares some people. Chuckles: that reminds me when I was looking at a house there. The neighbor came out to see what I was doing, with a very visible and accessible pistol stuck into his waistband. Turned out to be a nice guy, just concerned. He even gave me a lead on another house.
If the house is in the area that has not started turning around, you need to give some deep thought as to whether it's worth it. It's probably not at this point. If it's in the area turning around, it could be a decent value. You'll have to drive up and look around. Without the address, I can't be more specific than that.

Rehab cost wise I'd put it at a minimum of 25k if things went well, and as much as 40k, assuming it basically needs most everything. You never know until you see it. Always take a lot of good pictures, especially with your drive. It's a way to review every detail good and bad without having to revisit the property.

If you time your Dayton visit right, you can check out the local Meetup, it's on 6/14. https://www.biggerpockets.com/...
It's a great place to speak with other investors, and even find some contractors. If you're going to the Cinci REIA Thurs, I'll be there; come on by and we can chat.