Diary of a PIG -- Fredericksburg, VA -- SFH

[Eddy Dumire]

In a nod to Ben Leybovich, I bought a PIG.  I'm going to tell everyone how things work out for me on this thread.

The deal:

2/1 house in Fredericksburg, VA. It's a very small 725 single story all brick on a crawlspace built in the late 50's. I bought it at REO auction for $42,500 including buyers premium. I paid all cash using a LOC on another investment property, but may refi into a conventional loan down the road. I estimate the ARV at about $90k on the retail market, but it's difficult to find comps as that street is fairly unique. The cheapest house in all of Fredericksburg on the MLS right now is $81k and it needs a lot of work.

I would venture to guess that this is the worst neighborhood in Fredericksburg -- definitely class D.  Virtually every house on the street is a rental unit.  Almost all the property sales appear to be distressed.  My wife says she doesn't want to go there at night, but seems to be ok during the day.  There are a couple of old couches in the yard, a window a/c unit in the front of the house and a towel stuffed in beside the ac unit to close the gap.

Crime searches in the neighborhood don't turn up anything terrible though so I don't think it qualifies as a war zone.

This was sold as an occupied REO which means I haven't seen the inside of the house yet and I don't know anything about the tenant history. I like that the exterior is all brick and seems to be pretty sound from the few drive by's I've done. I'm pretty much banking on the hope that I can do a full gut of this house if necessary for less than about $45k.

Long term, I'm not sure yet what I'm going to do with this property.  A fellow BP'er has another one just like it down the street that is on the market for $900/mo.  He says he's getting really good traffic, just waiting for the right tenant.  I'll let him identify himself if he chooses.  If that holds up, and I spend very little on the rehab, then this will be the closest any of my properties come to the 2% rule.  There's another listed for $995 on the same relatively small street.

Alternatively, I thought of just flipping it and selling it as a starter home or investment property.  I've noticed that the same investor owns both of the houses next door to mine.  I would think I could unload it there pretty easily too.

I also have considered doing seller financing, getting a good size downpayment and holding the note.  Worst case scenario I would think is that I get the house back in a few years and start over again.

My immediate plan is to knock on the door tomorrow and find out who is living there and if they have a lease.  I think that discussion will largely dictate the direction this goes for at least the first few months.  The possibilities I see are:

1.  Tenant living there but can't or won't produce a lease and wont sign a new one -- treat as squatter -- offer cash for keys and/or give 30 day notice to quit.

2.  Tenant living there with current lease.  Ask for copy of lease, honor existing lease for as long as they want to stay.  Reassess at end of lease term.

3.  Tenant living there with expired lease in month-to-month continuation -- get him to sign a new lease or give him 3 months to leave (I think this is required since this was a foreclosure I don't intend to occupy).

When and if the tenant leaves, then I'll go in and decide what work to do and where I go from there.

I'm looking forward to hearing everyone's comments and feedback.

Eddy

[Joel Owens]

Heard all the ideas 1,000 times before.

Sounds great in theory. Reality is a whole different story. Rather than buy a piece of junk in a bad area I wait in great areas to find that right motivated seller.

You would need to contact the court relative to the eviction process. I have had one before where the seller wrote a note to the judge to let us takeover the existing case and they allowed it. Every state and process is different so it might not be possible where you are.

Having one month of rent to sign a lease doesn't surprise me. Now with a physical lease they may have bought themselves even more time before you can get them out.

Not to sound harsh but you have said you bought two nice area properties before and haven't been through hard knocks over and over again with these areas and types of tenants.

If you have someone beating down your door to buy this from you where you make a quick 10k in profit you might want to take that and run before it's too late.