Still on the House Prowl

I’d been sitting on my hands about seriously considering making an offers on anything, waiting until we got House #1 rented again, but it’s looking like that’s a done deal as we’re scheduled to sign a lease on Monday, so I dragged our realtor out again on Friday to look at more prospects.

More and more I’m falling into the very pessimistic camp, as far as the overall economy, and think we may be looking at 10% unemployment well into 2010, but if anything I’m more bullish on the idea of grabbing some rental properties in our neck of the woods. I think home prices still have a ways to drop, even locally where we’ve been insulated from both the highs and lows, but the rental market is really strong here. I was a little nervous bumping up the rent on House #1 by $50 but we got a ton of interest and applications and basically got it rented within a week.

Granted, there’s a non-zero percent chance that we might be headed for a true Depression, capital D, at which point homes could become unrentable at any price, but hell, there’s a non-zero percent risk with just getting out of the bed in the morning. Part of me worries that the seemingly no-brainer decision of picking up rentals now that cash-flow immediately could turn into a stupid decision in a few years if things really deteriorate economically, but living in paralyzed fear of a future calamity is no way to live.

So, here’s what I looked at on Friday:

Willow St. house: $89,500

This was by far the nicest house. 3-2 with about 1,400 sq. ft., which had recently been renovated and is basically in prefect, move-in condition. Good neighborhood, new plumbing, electrical, carport, concrete walkways and patio at the back of the house, all appliances with it (including stackable washer/dryer), the whole works. Didn’t take a ton of photos of it but it’s a standard 3-2, everything is very new as far as flooring and paint, appliances, etc.

The only problem is that it’s a short sale, and was recently reduced to the current price. The owners bought it for $115,000 (before spending $20K or so in renovations), so getting the bank to agree to anything below the reduced price is probably very unlikely. It would rent for around $950/month, so there’s just not much cashflow, and negotiating the short sale process could tie up my line of credit for months as I sit there and twiddle my thumbs.

This one will very likely go quickly at this reduced price, as it’s a great deal for a home owner, as similar homes are selling for $110,000-$115,000.

Blanco St.: $69,500

This is the one with “modern unique features” that I poked fun at in a past post. Honestly, this was a weird one, as I was shaking my head and laughing when we first walked around, but the more I thought about it, the more I became intrigued.

One nice plus that doesn’t convey in the photos is the location, as it’s very close to the town square, and it’s just a few houses down from some $200,000+ Victorians and other historic older homes. It’s a 1 bedroom, 1 bath 1000 sq. ft. home that someone pretty obviously worked on themselves, as it’s a weird mixture of pieced-together elements. And the layout is, umm, unique, as there’s just one pretty small bedroom, but it leads into a huge cedar walk-in closet (which is more than half the size of the bedroom), which itself leads into a huge bathroom that’s largely taken up by the 8′x5′ monstrosity of the blue-tile walk-in shower.

The “laundry room” is actually, umm, outside, on the side of the house (in the bottom right photo above). To get to it you have to exit the kitchen to the attached deck on the back, walk off the deck around the side of the house.

About 250 sq. ft. of the total square footage is in the addition with all the windows, and the entrance are those double doors at the front, at the top of the ramp. They also left the old exterior windows when the addition was added, so there’s a window in the bedroom that looks out to the addition, and the old front door is still there in the room that separates the living room from the addition.

The flooring is also a hodge-podge, as much of it is old long-leaf pine (rough but could be refinished, although two sections were cut out at some point and patched badly) and cedar on the floor of the closet and bathroom. Lots of strange hand-crafted wooden thresholds in some places, built-ins, decorate woodwork above doors, etc.

But it does have some potential and charm, and a great location. It’s kind of an odd house, as I was originally plotting ways to turn it into a 2-2, moving walls, standardizing this, yada yada yada, but it actually might have more potential going in the other direction. You’d have to move some walls to make the bedroom bigger, open up the addition to the rest of the house, sheetrock all the walls, and basically gut the bath, but it could be a very cool artsy/rustic house without a ton of heavy lifting. I’d basically leave it a 1-1 (obviously risky and limiting when it’s time to sell it) but play up the rustic appeal, to either an older single person looking to live close to downtown or a young couple.

As a rental, though, it won’t quite work at the current price. I’d probably spend about $7,500 making the changes I’d want, and my plan with any of these is to hunker down for a few years before trying to re-sell them. It’d rent for $650-$700/month, so I’d realistically need to get it for somewhere close to $50,000 for it to work and have a bit of padding as far as cash-flow. It was just listed recently, so this is one to keep an eye on, as I doubt they’ll get offers at $69,000, as the house won’t appeal to everyone, so it might be a more serious possibility if they reduce the price and will consider low-ball offers from there.

Peach St.: $59,000

Horror show. This is a 3-2 with about 1600 sq. ft. and is on a huge lot, but it’s a nice example of some flipping gone wrong. When I was first thinking about getting into the house flipping fun, a guy in town bought various properties, including this one, and seemingly made a killing flipping them.

Something seemed odd from the get-go, as he seemingly did a decent amount of work on them, but it was very hit or miss, with some major stuff done but other major, glaring stuff completely undone. He’d install a new furnace but would leave an old, disintegrating work. Interiors were the same, as he’d leave an old gross stained tub but put in a new pedestal sink. Despite that, the two properties he bought and flipped looked to be successes on paper, as they sold for full price within a week of listing, both at basically twice what he paid for them. According to the county records, he bought this property for $59,000 and sold it for $135,000 about 30 days after purchasing it.

Fast-forward to the present and it seems that there was a good bit of shadiness going on, as far as having an appraiser in his pocket and a straw buyer. This property on Peach St. was just foreclosed on, and apparently the previous owner sold it at an inflated price, managed to somehow pocket the difference himself, then rented it out, but at some point stopped making the mortgage payments. Tenants were evicted, property foreclosed on, end of story.

This thing really just needs to be bulldozed, as all of the cosmetic repairs he did are half-assed and need to be pulled out. Worse than that, though, is the floor is failing throughout the house, as he apparently just carpeted over the failing subfloor. You can feel the floor give in various spots as you walk on it, to the point that it feels like it’s just carpet and no subfloor at all in some spots. (Which actually might be the case, based on the other repairs). There’s only about 12 inches from the ground to the subfloor, so I don’t even know how you’d go about fixing it, as it’s not a slab foundation but there’s no room at all underneath the house.

Some of his handiwork is in the collage above, as far as texturing and painting over an old electrical box instead of removing it, and the “midget” door (our realtor is only about 5′ 10″). The door in that photo extends down about 12 inches past the threshold of the door, as I guess someone at some point raised the floor 12″ or so, but didn’t bother re-framing the door. I also like the strange X cabinet in the living room, there for absolutely no ostensible reason, but something the lasy guy just left there and textured/painted, too.

I’m not even sure this would be worth buying at $20,000, as it’s basically a big pile of crap to begin with that was further crappified by a shady “flipper”.

Sunset Dr.: $65,000

This isn’t quite as bad as the last one, but pretty bad. It’s a 3-1, about 900 sq. ft. on kind of a dumpy street in not the best location. It’s not terrible but it’d basically need to be gutted, as everything in it is old, stained, or just crazy.

They converted the garage into an office (I think), but it’s good oddly painted ceiling tiles and a strange mixture of 12×12 mirrored glass on the walls, along with pieces of carpet cut out and glued to the wall. Lots of water damage and mold in the bathroom and laundry room in the garage, needs a new furnace, roof, kitchen, everything.

This might not be terrible at $30,000 but even that’s iffy, as the neighborhood isn’t good and has no real prospects of improving.