Demolition of Foreclosure Single Famiily Residence in Phoenix

[Ed Caldwell]

Two years into investing and now FULLY understand the risk of buying sight unseen foreclosure at auction.  Looked good from the outside, but bad from the foundation up.  Anyway, this small house is in downtown Phoenix and was hoping for some recommendations for someone to get the permits and demolish the entire house that won't cost me an arm and a leg.  I received a certified letter from the city requiring me to board it up by the end of the month at a minimum, but that is only a temporary fix for 90-180 days depending on material used.  I was wondering if there were handymen or others that can perform this as well, since it will most likely take longer than the end of October just to get the permits?  I have never dealt with this before, so any advise is greatly appreciated.

[Justin S.]

Hi @Ed Caldwell 

Sorry, I can likely help you but not sure what you asking.  Can you clarify?

[Ed Caldwell]

Hi Justin, I just talked to my contractor I used for flips and he will board it up for me.  He also said it would cost $6K to $7K to cap all the utilities and completely demolish the building.  I guess dump fees are pretty expensive for this much debri.

I spoke with the City and at least that area is zoned for either single family or multi family.  I am contemplating putting a modular single family or duplex on the lot to at least start making cash flow.  I just need to figure out how I am going to come up with the money to do so.  After demo I will have round $57K into this dump for a piece of land.  Not a pretty picture.

[Adam Johnson]

This is a wild idea for you to explore at least - what are the repercussions to you if you simply walk away?  I STRONGLY advise looking at all legal aspects of this decision and it would be very very wise to speak with an attorney before going down that road.

If you determine that the City can pursue you for costs after they foreclose on you, then you probably want to be careful.  However, if the worst that can happen is that the City forecloses on the property and takes it away from you, then it might be worth consideration.

Regarding the cost to demolish, that price seems low.  I don't know how big the house is or any other pertinent details, so my comment may be worthless.  I would check VERY carefully what permits are required for demolition, especially if you are already on their radar.  In my area, for example, an asbestos survey is required prior to a demolition permit being issues.  If the survey determines that asbestos is present, then it must be abated prior to demolition.  

Don't try to skip this step!  If you get caught, depending on how the demolition is being done, you may be forced to treat EVERYTHING as asbestos which will blow the cost sky high.  I know of a building in my area, built out of sandstone, that an investor tried to skip this step and also tried to demolish without a permit.  He got caught, the materials are all co-mingled, and they now all have to be considered as contaminated with asbestos, even the sandstone which is extremely heavy.   Very expensive mistake!

[Ed Caldwell]

Hi Adam,

Walking away is not an option to me. I do not need a foreclosure on my credit score. This property has no mortgage so if anything I own a piece of land for now until I figure out what to do with it and how to finance a new building to cash flow.

I do not cut corners and will have my contractor pull permits and tear it down. That way I can always go after him if anything is done incorrectly.

Thank you for your input.

[Cole Walker]

@Ed Caldwell Just for a bit of back up, that price of 6-7k for tear down is right in line with the price here in Seattle. Assuming that the house is not a slab on grade, standard stick frame construction and is average sq ft. 

Ya never know, the property may be worth more if sold bare rather than sold with a broken home on it.

[Ed Caldwell]

Thank you for letting me know it is in the ballpark Cole.  Yeah, I already tried to wholesale this property at a loss and no takers.  I don't blame other investors who would rather get into something easier and fixable.  I just look at this as another challenge to learn even more about real estate.  I now know required permits to demo this house, including permission from the historical society.  I also found out that my property taxes go up and not down as bare property is taxed at a higher rate than one with a structure.  Figures.  I am learning about modular homes and how to finance them to turn this lemon into lemonade for the cheapest cost I can to get it cash flowing.  They even build modular duplexes.  This just has become a longer term project since I still have the day job and not enough time to deal with this right now.  I need to start focusing on using what resources and time I have left to start building cash back up again.  Wholesaling is the next learning objective as the revised strategy.