He’s Lost His Mind (Or, You Know, Made an Offer on a House)

So after weighing all the assorted prospects I’ve looked at of late, I finally pulled the trigger and made an offer this afternoon. On which house, you ask? Well, err, none of the above.

Here’s the beaut of a property that I just made an offer on, as far as a photo dump and then text beneath:

Lest you think I’m nuts, there’s a bit of a method to my madness. First off, the property was just listed last Friday at $12,000, and I offered $7,250, so we’re talking pretty much bargain basement prices here. Someone bought it at a tax deed sale a few years back, sold it to someone else who bought it as a favor to an employee who was supposed to renovate it (but who gave up at some point) and is now trying to unload it.

It’s not in the most desirable part of town, but it’s actually not a terrible location, as it’s on a wooded dead-end street near a park and elementary. Other than the abandoned pink house that’s smack-dab beside it, there are no immediate neighbors at all, so while the lot is small you actually have some space and peace and quiet around it.

It’s only 525 sq. ft, so it’s pretty tiny. Needs all new electrical and plumbing, new roof, new windows, a new side door, new connections to electrical/water/sewer, all that. It’s basically a shell, although some of the sheetrock work done recently inside can be salvaged.

While it doesn’t look like much, it does have some pluses, as far as a project to rehab and rent. It’s within walking distance of one of the local elementary schools and is very close to downtown. It’s currently appraised by the county at just over $5,000, which means the annual property taxes are about $170. No, that’s not a typo. It takes the county years to catch up (if then) as far as accurately appraising rehabs and adjusting the taxes accordingly, so that tiny tax bill will realistically remain the same for at least 2-3 years.

The old asbestos siding is actually in pretty decent shape, despite its mismatched appearance, and just needs pressure washing and painting (other than the back of the house, where the siding needs to be replaced). Much of the demo work has been done and the foundation is in surprisingly good shape. The subfloor is a patchwork of different materials so some work will need be done to level everything out to put down taile or carpet, but structurally it’s pretty sound, and not at all what you’d expect in an abandoned, boarded-up house.

There’s also a fair amount of materials left in the house, including the oven which is actually very clean and the old stained cast-iron tub, which can be re-glazed. Someone also left a few new windows and a new door, which they never got around to installing, as well as two decent step ladders and other materials and tools. There’s probably $1,000 worth of stuff in the house, all of which conveys.

The city also has a program where if you’re rehabbing a previously abandoned property (and not scraping it and building new) they’ll waive the fees for re-establishing electrical and sewer service, saving you about $4,000 on average.

Another big plus for me is this will give me the chance to break out some of the old designs I came up with when tinkering with the idea of building some very simple, small homes, as the layout is basically just a big rectangle, which is what I was working with before, as far as an extremely simple 1-1 layout with an open floor plan.

There’s also the opportunity here to give another idea of mine a whirl, as far as basically rehabbing an entire area, buying stuff on the cheap originally and developing the entire street. There are five lots on the same side of the street as this property, with three very small houses on them, all of which are abandoned. I should be able to buy up the other lots pretty cheaply and, over time, either renovate the other two abandoned houses or scrape them and build similar small affordable homes. On the other side of the street there’s only one house built on the seven plots, and it’s actually a nice little house and well-maintained, so room to build there as well.

Crunching the numbers, I should be able to rehab this house for $15,000-$17,500 (doing a lot of the work myself), and rent it for $400-$450. I’d be in it for a total of $25,000-$27,500, and a conservative ARV would be $40,000, given the condition of the neighborhood as it now stands. Clean up the other abandoned houses around it, though, and that’d jump to $45,000-$50,000.

Not the most lucrative of potential deals, but it’s also pretty low-risk. We’ll see if they bite on my offer, as I can’t really go much higher than $8,000 and they did just list it, so they may not be willing to go that low. Or maybe they’ll be ecstatic to get any offer for a property like this and immediately agree. We shall see.

Edit: Heh, that didn’t take long. The lady selling the house seemed to think that an offer of $7,250 wasn’t even worth countering and claimed she has twice that in the house. Which is complete BS, as she got it at the tax deed sale and the past taxes due couldn’t have been more than a couple thousand dollars, and that’s only if they didn’t pay any taxes at all for like 15 years.

Basically wished her best of luck at getting anywhere near $12,000 for it and to give me a call if/when it sits there, unloved, and she’s more willing to negotiate. I know there’s not a ton of difference in my offer and what she wants, but there are too many properties out there at the moment to chase after one like this, which wasn’t the juiciest deal to begin with.