My first hoarder house deal!

[Eric Bousquet]

Hello Everyone,

My name is Eric, I'm a General Contractor and REI from the Western MA/Springfield, MA area.

   I'm about to put an offer in on my next property and I was hoping to run the details by everyone and see if I could get some feedback.

The property was brought to my attention last week and I made contact with the homeowner set up a time to come see it. The property is a mid-50's 3bdrm 1.5 bath 1100 sq ft Cape on a 1/3 of an acre. It is located in a nice town but on a main road. It is not listed on the MLS.

 I was able to secure funding through a hard money lender so I'm confident I can close in 3 weeks if we can make a deal. 

To my surprise when I drove up I actually did work on this property about 8 years ago. My company put a commercial grade flat roof on the back section of the roof. So I know that's good. ;) she had also had the shingle roof replaced, new siding and new replacement windows done before she got sick.

   Now the bad; the elderly woman who had ben living there had developed dementia over the years and became a hoarder. So the home is chock full of things, trash, furniture and general filth. And fallen into much disrepair. She passed in Nov and her daughter has since inherited the home and is on a fixed income and cannot do much of anything with it. She was actually having a hard time even being in the house and had to have her fiancée walk me through. 

   I did my walk through and inspection. I crunched my numbers over the weekend and did my comps as best I could. Not being a Agent and all. I came up with $80K in repairs to make the property fit for resale. That includes complete renovation, removal of wallpaper, replace damaged and gross drywall and Celings, hardwood floor refinished, baths, interiors doors. All plumbing & electrical up to code. A yard that is completely overgrown and just a mess.  A septic system that based on it's age probably will not pass a Title 5 inspection. And renovation of kitchen that comes complete with cowboy wall paper covered cabinets. 

Comps are a little tough for this property because it is on a fairly busy main route into town. So the 1/4 mile rule is a little deceiving. In the past year there have been 6 properties sold on that street in close proximity. Ranging from $147k- $169K with a strange outlier at $189k. I am placing the ARV of this property at what I consider a conservative $160K.

   I calculated about $15k in buying, transactional and holding fees on a 6 month rehab loan. $80k in renovations. $5k in realtor fees. $2.5k in staging and advertising.

I was planning on offering her $40K for the property.

I would love to hear anyone's opinion on how I've approached this deal. 

Thank you.

   Eric