Tear-down property not worth the cost of demolition...ideas?

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Tear-down property not worth the cost of demolition...ideas?

David Sussman
Investor · Indian Trail, NC · Member since 2018 · 63 posts · 33 votes

So I found this property off a tax list. It's in terrible shape, most likely a total tear-down. Been vacant for quite a while, and is completely uninhabitable at the moment. Even if it was to be rehabbed (which would easily run over $50k) the ARV would still only be around $65k. The owner agrees with me that the only value here at all is the lot itself, which isn't even all that valuable. Based on comps, I put the value of the lot at around $5k. Average demolition costs in NC are between $5 - $9 per sqft, which puts the cost to demo this property between $4500 - $9000.

This seller is very motivated, but I'm honestly not sure I can help her, as even if she were to give it to me for free, it would still cost more money just to scrape the house than it's worth.  Does anyone have any ideas?  I'd really like to help this lady, even if it's not by selling to me, but I can't think of any way out of this for her that lets her walk away with any money.  

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

Why are you working so hard to make it work? Determine what price would make you salivate and then offer that. If they reject it, walk away and move on to something different.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    Why are you working so hard to make it work? Determine what price would make you salivate and then offer that. If they reject it, walk away and move on to something different.

    The DIY Landlord Book4.7248 Reviews
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    9Reply
  • Owen DashnerPro Member
    Lender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
    7y

    Not worth spending any more time on it, unless the property can be rezoned into something with a lot more land value.  You can't help everyone - it's hard to say no, but you can't play superhero by making their problem your problem and expect to be in business very long.  It's hard being an empath in this business (I am one) because you come across a lot of heartbreaking situations.

    4Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    It, and the lot, have no value....perhaps a negative value actually....let it go to tax sale.

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Owen Dashner:

    Not worth spending any more time on it, unless the property can be rezoned into something with a lot more land value.  You can't help everyone - it's hard to say no, but you can't play superhero by making their problem your problem and expect to be in business very long.  It's hard being an empath in this business (I am one) because you come across a lot of heartbreaking situations.

    Yup. Real Estate is a savage business. No room for excessive emotion in this biz.

    2Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @David Sussman:

    So I found this property off a tax list. It's in terrible shape, most likely a total tear-down. Been vacant for quite a while, and is completely uninhabitable at the moment. Even if it was to be rehabbed (which would easily run over $50k) the ARV would still only be around $65k. The owner agrees with me that the only value here at all is the lot itself, which isn't even all that valuable. Based on comps, I put the value of the lot at around $5k. Average demolition costs in NC are between $5 - $9 per sqft, which puts the cost to demo this property between $4500 - $9000.

    This seller is very motivated, but I'm honestly not sure I can help her, as even if she were to give it to me for free, it would still cost more money just to scrape the house than it's worth.  Does anyone have any ideas?  I'd really like to help this lady, even if it's not by selling to me, but I can't think of any way out of this for her that lets her walk away with any money.  

     Move on my man, no value here.

    3Reply
  • Anthony Dooley
    Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
    7y

    PASS! I can show you a thousand properties that fit this description. I would only consider it if I could buy, tear down, and build new and still make money. Chances are, you can't do that. At some point, the city will tear it down and send a bill to the owner for $5K.

    1Reply
  • Dave DeMarco
    Rental Property Investor · Pittsboro, NC · Member since 2016 · 97 posts · 85 votes
    7y

    @David Sussman Are you sure you aren't missing some value here. What area is the land in? The land value in and around central NC just keeps going up. Even in rural areas. Would a mobile home work on the land to get some cash flow?

    1Reply
  • Saul L.
    Specialist · Kiryat Motzkin, Israel · Member since 2014 · 266 posts · 159 votes
    7y

    If you really want to help you will have to think out of the box. 

    @Jeff Rabinowitz wrote a blog post where he describes how he invited the local fire dept to burn his house down for training purposes, and if I remember correctly they also cleared the plot afterwards at their expense. Everybody wins.

    8Reply
  • Lindel Turner
    Investor · Jonesboro, AR · Member since 2017 · 136 posts · 79 votes
    7y
    @David Sussman I was in a similar situation last year. Bought a lot for 6k finished had 75k in the home. House cash flows but others in the area are 50k 30 years old. They rent for same amount. Did I loose? No still cash flowing run the numbers.
    0Reply
  • Saul L.
    Specialist · Kiryat Motzkin, Israel · Member since 2014 · 266 posts · 159 votes
    7y

    Found the blog post-https://www.biggerpockets.com/blogs/4527/44793-i-burned-my-house-to-the-ground

    Maybe an idea.

    3Reply
  • Andrew Angerer
    Rental Property Investor · Dayton, OH · Member since 2018 · 234 posts · 183 votes
    7y
    @Saul L. Now that's creative!! Plus it's a win win so even more points to you. I heard of a situation where a large pine tree had to be cut, instead of spending $2k on it, the owners donated it to the city to be their Christmas tree. Not only was it free to remove, the tree ended up being a tax write-off. There are always creative ways to real estate issues.
    7Reply
  • David Sussman
    OP
    Investor · Indian Trail, NC · Member since 2018 · 63 posts · 33 votes
    7y
    @Saul L. Thanks for the idea! And thanks to everyone else for your thoughts as well. I was thinking I would have to just walk away from this one, and I may still have to, but at least there are a couple "outside the box" options to consider. If I'm able to pull a rabbit out of the hat on this one, I'll post an update.
    0Reply
  • Jeff Rabinowitz
    Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
    7y

    @Saul L., thanks for reposting the article. There is usually some prep (and expense) needed for fire departments to use your house. If it is even just a possibility, please reach out to them. Training opportunities are hard for them to find in many areas.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jeff Rabinowitz:

    @Saul L., thanks for reposting the article. There is usually some prep (and expense) needed for fire departments to use your house. If it is even just a possibility, please reach out to them. Training opportunities are hard for them to find in many areas.

     yes with lead paint and asbesto's the fire burn down for practice are very rare .. it can happen but I have never gotten a fire department to do one for me.. Now i just bought a big developement in Oregon 89 lots .. there is one house I am going to try to move and one would be great if I can burn it down.. will see how it goes.. 

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  • Jon Allen
    Rental Property Investor · Bloomington, IL · Member since 2018 · 55 posts · 90 votes
    7y
    @Lindel Turner it sounds like you DID lose because you could have gotten the same rent for 33% less capital, leaving more for your next investment. Just because it cash flows doesn’t make it a win.
    0Reply
  • Dennis Pressey Jr
    Specialist · Philadelphia, PA · Member since 2014 · 231 posts · 69 votes
    7y
    @David Sussman Every house is not an entertainable deal. Seller financing :)
    0Reply
  • David Sussman
    OP
    Investor · Indian Trail, NC · Member since 2018 · 63 posts · 33 votes
    7y

    Well, if anyone cares for an update, here's what I did:  I already knew that this was such a small deal that I really didn't want to waste my own time with buying it (even for $100) and then trying to get the FD to burn it down and clear the lot for me, and then try and sell the vacant lot for a measly $3-5k.   But, having the servant's heart that I do, I called the owner and told her about how she could try to do just that, and that if successful, she could get the tax write-off of donating the house to the FD, and then sell the lot and at least make a couple grand.  She was receptive to the idea, and very thankful that I had shared that idea with her.  

    I then recalled speaking with a guy who buys in that area, and a conversation I had with him just last week about how he is looking for properties under $20k that he can rehab, as he is a contractor.  So just for $h!t's and giggles, I called him up and told him to take a look at it and see if he thinks he can do anything with it.  

    Side note; normally I would never give out the address to a buyer without having it under contract already, but at this point I had already 99% decided I wasn't going to make a dime on this deal, so I figured no harm, no foul.  The buyer, being a nice guy, still asked me what I'd be looking to make off the deal, and I told him basically nothing, maybe a few hundred bucks.  Again, not how I normally do business.

    Back to the story, after I gave him the address, the buyer tells me he knows the place--it belongs to his cousin!  Various family members own almost every lot on this block!  Small freakin' world....so we had a good laugh about it, and he said he'll call her up and try to help her out.  I told him I was going to step away from the deal since it was now a family matter.  He laughed and asked me to call his cousin and "talk him up" so she'd see him as more professional...hahaha!  

    Then I called the owner back and told her who I'd spoken to, and now it was our time to laugh.  

    Long story short, even though I didn't make a penny on this deal...which isn't even a deal at all...I am feeling pretty good about doing everything I could to help this lady out, even if the only thing I accomplished was reuniting two family members who haven't been in touch for a while. I know I wasted my own time on this, but I don't even mind too much.  I didn't lose anything, and in fact I gained some knowledge and experience, so I call that a win.  

    Thanks again for everyone's input on this, you guys are the best!

    9Reply
  • Andrew Angerer
    Rental Property Investor · Dayton, OH · Member since 2018 · 234 posts · 183 votes
    7y

    Sometimes, doing the right thing for good Karma is what life is all about. You'll get a good deal soon!

    2Reply
  • Brett Lee
    Flipper/Rehabber · Member since 2018 · 102 posts · 103 votes
    7y
    @Saul L. Yep... Its called "burn to learn"
    1Reply
  • Leo Furest
    Miami, FL · Member since 2018 · 71 posts · 87 votes
    7y
    @David Sussman Walk away David, if things are just as described you might be wasting your valuable time, that you could be using looking for a great deal!
    0Reply
  • Mark Nickoson
    Rental Property Investor · Dayton, OH · Member since 2015 · 79 posts · 85 votes
    7y

    @David Sussman you got a few laughs out of it, and we did too.  Now you've got a good story you can tell at parties.  Next deal...

    Mark

    1Reply
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