All Forum Posts by: Joey Allison

@Caleb Heimsoth Thank you. My plan is to use a contractor for the work, but tell the auction company we spoke with a restoration company to help get the property at the reduced bid price 

@Doug McVinua drainage is fine around the outside. The foundation is on sandy soil. Thanks for your input! Much appreciated 

@Don Gouge I fully understand where you're coming from and here is my rationale: I have purchased 2 rental properties on MLS. One for $100k and the other for $115k. After closing costs I'm into those 2 properties for about $60k. That money is just sitting there, and I can't do anything with it. Also, that method of purchasing properties isn't scalable for me. I can't afford to pay $30k for each property that only NETS $250 per month. It would take me forever to reach my goals buying real estate at retail prices and putting 25% down each time.

With auction homes, I can buy at a deep discount. Not all auctioned homes are going to be dumps with mold. So what I do is try to view the property from the outside and peak through the windows to get a good idea of what the inside looks like. I can get a pretty good idea of the condition of the property by knowing with the outside and some of the inside looks like. I think the mold problem is a not typical.

Also, one more thing. If the mold turns out to be an easy fix and it only costs me $12k to fix and the auction company allows me to reduce my purchase price by $20k, I just added $8k to my profit by taking on a problem most people would never want to mess with. 

I heard a quote the other day that may or may not help: “scared money, never made money”. Those who take on the higher risks often take home higher rewards.

Just my thinking... everyone is different.

My suggestion is to find out if the current tenants pay enough rent to create positive cash flow on the property. If they do, then wait on renovating until their lease is up. Once the lease is up, boot them out and update it.

@Craig Jeppesen thank you!

@Theresa Harris I guess my concern is not being able to inspect the inside of the property to see if the damage is more than I have room in the budget for. It’s a gamble that could pay off if I can remidate the mold under budget. But could bite hard if it goes over budget. 

Hey guys, I need some help. I bought a house at an auction. There was not access allowed to view the property prior to bidding. After I won the auction, I was walking around the house to get some more ideas on what to do in terms of rehabbing it. At that time the previous owner was there picking up her mail. She told me the interior is overgrown with mold. She sent me pictures. There is mold behind the base boards and between the grout of the tiles. No visible water damage was coming from the bathrooms. Most of the flooring had been removed so there is not much mold left in the floors. The previous owner believes there is a pipe leak in the foundation that is causing the mold growth. We live in the hot Arizona desert so mold is not very common here. I have received pricing to remediate the mold anywhere from $10k from a contractor or to $30k from a restoration company. 

Here are the facts: 

*I purchased the home for $89k.

*It has an ARV of $145k

*the home was built in 1954

*The home is 1,100 sq. Fr

*The renovations is expected to be $20k

*The mold remediation is likely to be $12k (based on a contractor’s opinion for a house of this size)

*I asked for a $20k bid reduction to help as a buffer in case the mold remediation goes over budget. I am waiting on an approval for this price reduction.

*I have not signed a buyer’s contract so I can technically still back out.

My question to you guys is, even if my new asking price is awarded, would you proceed with this investment or would you walk away and find a new investment?

Thank you guys!

@Michael Ealy your comments are spot on. I appreciate you weighing in!

@John Clark I appreciate taking the time. But there might be creative ways to utilize the entire $300k depending on what vehicle they are invested in. For example, if I take the $300k check and immediately buy equipment for my business instead of moving it into real estate, I can possibly avoid paying taxes on the $300k by taking bonus depreciation on the new equipment purchased. It’s still uncertain to me if I can do that, but thats the part I mentioned in an earlier response about having not spoken to my CPA yet. But if it makes you more satisfied, we you can use the $225k Figure.