Are Condemned Houses Worth Contracting??

Question

We are just getting started wholesaling properties in the Cincinnati area and through direct mail we have come across a situation I could use some advice on. A property in a low income part of town has been vacant for the last 5 years. The owner owes the City of Cincinnati fines for the vacant property and backed taxes. We have offered the owner a thousand dollars plus clearing up the fines and taxes for the property. We are expecting to negotiate with the city for fees and don't expect to pay more than 4k total for the property.

The question is with it being called a condemned house with possibility of demolition in the future, is it still something worth pursuing? Has anyone dealt with those and have any advice for the situation?

Steven J. · Answer

I just started a mailing campaign for back tax properties. I'm awaiting, quite anxiously, to hear from interested parties.

I think you'll need to go to the city and figure out why its being condemned. If you offer to do the demo yourself maybe you can get the city to waive the taxes and fees on the property. Better yet, get a developer lined up who can build a plex unit or something better and present that in your case to the city.

Andrew Tudor · Answer

Thank you all for your comments and advice. I will be reaching out to the city to see where they are in the process and what stipulations there are for the violations. The idea of handling the demolition ourselves has crossed our mind.I will keep you updated on what I find out.

Patrick L. · Answer

It really depends on the house and depends on the area.  If the repairs exceed the repaired value (or even come close to it) then you won't be able to give it away.  Is there any new construction in the area?  Any market for vacant land?

Ben Skove · Answer

@Andrew Tudor If you haven't already, go to http://cagisperm.hamilton-co.org/cpop/permits/address.aspx and plug in the property's address. It'll pull up the current and past violations on the property, as well as the housing inspector who's assigned. Clicking on the violations will give additional details on the violations. Calling the inspector is a good way to see what the city expects to have done to bring the property back into compliance. Be aware that if there are civil or criminal penalties in the pipeline, they can go to the new owner.

There's a difference between a building that's been ordered "keep vacant" and which can go into the vacant building program, and one that's been condemned. When the violation status goes to "haz abate" and it's "out to bid", it usually isn't all that long before it comes down.

Andrew Tudor · Answer

After checking the status with the City of Cincinnati through the website we could see the problems Identified by the city. They well exceed the value of the property because of the area. The land would not be worth pursuing because of the area also. Thank you guys for weighing in this issue and saving me a lot of time effort and money.

Wayne Brooks · Answer

No one generally wants to build new in a low income area, so demo'ing it trying to sell the vacant lot probably makes no sense.  You need to talk to the building dept to see exactly what must be done to make it occupant worthy.  In most areas, if it's over a 50% rebuild, dollar wise, you must meet current codes, which may be impossible, or make no financial sense.

Dominic Turner · Answer

Hey @Andrew Tudor -- My main source of deals come from code violations and vacant properties. I have ran into issues when the property has been on the City's petition of demolition list. Usually before we close, we would have to contact the lawyer for code compliance to find out if the judge signed the order for the property to be demolished. If not, then you are in the "green". Here in Dallas we would have to get the lawyer to file an extension with the courts to give the buyer 90 days to repair the property to make it "livable."

If I were you, I'd contact the city code compliance office and find out who's in charge to signing of the the order of demolition. Then you can see if there could be an extension filed. I would not back out of the deal, as sometimes it could take the city years to even demolish a property.

Bill Gulley · Answer

Start at the city and see what the plans are for redevelop are, if you have blocks of properties most likely there is a master plan and it may be years in the development. Generally not a strategy there for small investors. If it's spotty, then options Steve mentioned could be viable, consider demo and removal, there can be hidden expenses there so get experienced advice in that area. :)