Deal Analysis Advice in E. TN

[Travis Donley]

Hi,

My wife and I just started looking for our first house around Chattanooga, and we came across this fixer-upper:

http://www.zillow.com/homedetails/6680-Hickory-Tra...

She wants a big house, and above all else I'd like to make a sound investment.  We looked at it earlier today, and it needs extensive cosmetic repairs inside, and some structural issues outside (rotted soffit/eves). Windows look newer (last 10yrs).

We talked to a neighbor, who gave some insight. The owner owns free and clear, and wants to sell. He rented it for the last 5-10 years, and didn't keep up with maintenance very well, and was trashed pretty good by last tenents. The house is not insulated and he said winter utility bills were $4-500 a month. HOA fees are $60/mo, includes lawncare and community pool.

Is this a good deal to buy, fix, live in, and or rent/resell in a few years? Any advice is much appreciated, thanks. Also, I'm not sure of what other info to include, so feel free to ask if I've left something out.

Best regards,

Travis

[Tyler Wehrung]

Travis,

I do not think this would be a great investment based on the information provided.  The house is listed at roughly a 25% discount according to the numbers in your link and Zillow's estimate market value.  Most investors will look for properties that are discounted 15-20% without doing much work.  When I hear you say extensive cosmetic repairs, I'm thinking 20-30k which puts you at or above market value for this house.

Since it is owned free and clear you might be able to work some creative finance/owner finance options.  Do your homework on the tax advantages that he will observe by not taking a lump sum so that you can help convince him.  Or I would put in an offer that is considerably lower than what he is asking.  If the house needs a lot of work he might be interested in just getting it off of his hands.

I would also suggest having a better idea of your investing goals before you jump into this house. In my opinion you're either looking for a home to live in or an investment. If you don't have the investment capital and want to take a stab at house hacking or BRRR method, I would consider a small multifamily or flipping. It's too much of a hassle to move all of your stuff into a construction project only to move right back out again in a few years.

Good luck with what ever you decide!