Prepping for first purchase - Rural investing in a dump

[Dan Cakora]

Hello there!

I currently live in Chicago and have just about had my fill of city life. Recently, my significant other and I have been spending time in rural southwest Wisconsin. It's great! The pace of life suits me, I'm enjoying much more outdoor activity, and my current employer allows me to work remotely. Best of all, the housing prices are dramatically less than what I see in Chicago, where the median price in my neighborhood for a 2br/2ba (most common condo type) is a shade over $400k.

Recently, I found a duplex in the small town that I like. Originally listed for ~$120k, sold "as is".  Took a tour and WOW it needs a ton of work. In addition to the normal stuff like redoing floors, bathrooms, cabinets, etc., the floors are all slanty (weird braces in the basement prop up part of it), the roof is in need of replacement, and there is a bunch of water damage and mold. It's too much for a beginning investor like me, as it would be a money pit. I am walking away and forgetting about it, but I want to use the example as a learning opportunity.

To give more background: husband and wife owned the place. Husband had been ill and recently passed away. He was in charge of taking care of the place, and it clearly fell into disrepair. Was allegedly a contractor, so I wouldn't be surprised if a lot of the work he did was not up to code or property permitted. Wife wants to get rid of the place and be done with it.

The wife filled out a " Real Estate Condition Report" for the state of Wisconsin that is obviously full of errors. For example, Line C.10 is about being aware of defects in the basement or foundation that is marked "No" in spite of clearly visible issues. This is probably due to ignorance instead of malice.

In the spirit of learning, I have a bunch of questions:

1. What would you do about the incorrect "Real Estate Condition Report?" Request that the owner hires an inspector to go through the home and then fill out the form?
2. The owner clearly doesn't realize the extent of the work this place needs, hence selling "as is" at the tax assessed property value. Would you have a contractor estimate how much it would cost to bring the building up to code (mold, remedying the other work that was likely done without permit, sinking floor, etc.) as well as standard improvements (cabinets, floors, etc.)  and submit that as proof to the owner of a need for a massive price reduction?
3. Given the need for extensive repairs, at what point do you think about knocking the whole thing down and starting over?
4. The tax assessed value of the land is $30k. Is it feasible that the structure on top of that land is worth negative value, and the land could be purchased for less than $30k?
5. Comps are tough to come by in rural areas such as this, whether for sales or rents. What have you done in absence of comps when discussing price with sellers, or convincing the bank of the new value (thinking of the refi part of the BRRRR strategy)?
6. How would you finance something like this? For the sake of easy numbers, let's say I can purchase the property for $40k and it needs $60k worth of repairs.
   1. I don't have the $100k in cash to float it myself.
   2. I've read "The Book on Investing in Real Estate with No (and Low) Money Down" and it suggests private money or hard money lenders. Given that this is my first time out and the rough condition of the property, I feel like it would be difficult to get anyone on board.
   3. I am hesitant to get into a 203k situation, as my initial search has come up almost empty for contractors in the area that would take on a 203k situation due to the red tape and delay payment.
   4. $40k is below the threshold for most places to issue a mortgage. Any thoughts here?

Thanks in advance for any insight you can provide!