Code violations good?

[Tricia Coke]

Hello everyone. I've been looking around the site for a while and it seems any question you have someone has already answered, but I came across a post where someone suggested going to city hall to get properties with code violations. How would buying a property with code violations be a good thing in regards to wholesaling it?

[J Scott]

My guess is that this is a suggestion for being able to buy properties cheaply -- those properties that have known code violations are going to be in less demand, as fixing them will be more labor and cost intensive, so you may be able to get the sellers to agree to a much lower relative price.

Just a guess...

[Andy More]

I would also assume that owners of these properties will have a higher motivation to sell and get out of the rental business as noted by the fact that they are not mainting their investment.

[Tricia Coke]

I see, violations can give you better grounds for negotiating. How would you find out how much they could cost you so you can negotiate a fair price?

[Steve L.]

Tricia - no traditional bank will finance a property with code violations. Thus either the seller will be willing to fix them (most banks won't) or deal with cash buyers ONLY.

If you eliminate 70% of the market (it used to be 95% of the market)... and are competing only with other investors that should substantially increase your chances of getting a "deal."

[Account Closed]

code violations are awesome!!! most times they're stupid little things, like paint finish is worn on window trim, or door is not weather tight...they're really not that bad, but pages of them can add up if you're hiring a handyman. i just rehabbed a property and i think it had 7 pages of code violations lol...it cost a bunch of money, bc there were larger code violations as well...the best thing to do is talk to the code inspector to see if he'll work with you, and also to see the list of violations...now the code inspectors love me bc i've made their job easier, so they actually send me leads..imagine that! they send me deals and tell me how long the aparments have been vacant, etc. definitely a great niche to at least look into

[Brian Wall]

I have had the same experience as Bryan (above). In my backyard, Norwalk, I know all the inspectors (only 5 of them) on a first name basis.

The only deals we have done in Norwalk have had violations and most even as far as been tagged as "substandard". Those ones that are bank owned, the banks want to dump, but even better are those that are substandard that are NOT bank owned. We just picked up one deal that needs about $50k in repairs (major), but we picked it up for nearly 50% of ARV. It was being sold by a trust, and the substandard "scared them".

Brian

[Rich Weese]

Tricia and Steve L- I have a piece of crap property in NJ I got stuck with from a bad transactional loan I made. I have a buyer that actually received a "real" loan committment from Wells Fargo on an FHA loan for 50K more than they're paying me! The monies are escrowed to do the repairs.
So,, there are some situations where traditional banks will loan on crap. I also sold a piece of crap in Florrisant, MO that was sealed shut to a buyer with a loan. Rich

[NA Foster]

Please tell us how you deal with the new LEAD BASED PAINT laws. Thank you

[Timothy W.]

Code violations scare people who aren't investors.

Investors look at code violations and realize it's a definitive list of what they have to do, no more, no less. Huge caveat here - you have to know the inspector.

[Tricia Coke]

What else can the inspectors help you with besides showing you the list of violations?

[Account Closed]

in my city, they charge 40 bucks a day (or something like that)...they have the right to waive it if they feel like you're working on it..now when i bought a building and 4 apartments had code violations, that would've been 160 bucks a day, not tomention the violations had been open for months, so i was responsible for the unpaid penalties as well..this would've added up to several thousand dollars in penalties...they worked with me, and even gave me extensions if i needed them..these guys can be friends or enemies...be nice to them! lol

[Mark N.A]

Depends on location, too.

I've got properties in low-income 'transitional' neighborhoods where various slumlords have let their properties deteriorate badly. The city would LOVE for some investor to come in and bring them up to code.

These are quite usually huge, expensive projects which I want no part of.

I prefer to wait until the bulldozers come in to flatten them.

But for someone just starting out, with time and energy on their sides, this could represent an opportunity. But it ain't no free lunch.

[Taylor Knott]

@Mark N.A:

I have the same sentiments. I've been on the hunt for my 1st rental property. I made an offer on a house built in the early 1900s. The second unit which was previously a garage never got permitted. Ceiling height was too low and electric/plumbing was never inspected before it was concealed. The city is really friendly to investors to fix these problems because we have a severe housing shortage. Listing agent guessed at $5K for permits and repairs. But a co worker who has a construction background said it would likely cost much more. On top of that the house had a bunch of deferred maintenance likely 40-50K. So I walked away because they weren't motivated to work with me. That place would be more useful bulldozed or at a severe discount.