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  1. #1
    Join Date
    Aug 2013
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    3

    Default I think we're crazy

    Am I really crazy to ponder buying the house next door that generally dates to 1918, though hearsay in town tells us the original brick center part of the house is Civil War-era? The house had an attic fire 2-3 months ago. The water damage was significant but without subfloors, the water flowed to the dirt floor basement, for the most part (no pooling of water on floors). The neighbors' insurance co offered them a complete settlement, "totaling" the home. They came over to tell us today it will be demolished. Very tragic, in my opinion. The quote for mold remediation was the turning point for the neighbors (who are in their 70s).

    However, 2-3 months of demolition has already occurred. The home is a shell and so much of the home is still very salvageable. Solid roof, solid foundation, solid walls, beautiful floors that are undamaged on the first floor. Part of the home has updated electrical (the attic did not). Parts of the plumbing are updated but maybe not all. No central air (we're in VA). Mold remediation has not begun. My significant other is a former construction guy, remodeler, historic restoration, etc. But, he owns 2 companies and already works A LOT.

    We would be buying the land and not the home, according to the real estate records. The home is not livable, presently. It would be in the name of an LLC, as an investment property. And, we'd need financing for it as well.

    I don't know what to think and am trying not to think emotionally, but tearing down that beautiful old home would be a tragedy.

    Input is most welcome. I'm looking for advice as to how to proceed. I need to keep probing and asking questions but not sure which way to turn first.

    Thanks!

    Dani

  2. #2
    Join Date
    Jul 2010
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    SoCal
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    Default Re: I think we're crazy

    1. You have to define why you want to purchase this house and what will you do with it. When doing so, you need to separate emotions from logic.

    2. You mentioned that the house was torn down already and is not in livable condition. You mentioned that your partner is maxed out. You mentioned that the water damage is unreal. You mentioned a few more things that bring in this question: can you handle it all?

    3. Financing is cheap, if your partnership can qualify, and that's just about the only good thing.

    4. You need to know what you're getting into. Does your friend approve? you mentioned that he does restorations.

    5. I wouldn't rebuild it. But if I bought the land, I would build a new house on spec: the market is heating up, and there is an opportunity to make serious money in building custom homes, providing that the location is desirable.

  3. #3
    Join Date
    Aug 2013
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    3

    Default Re: I think we're crazy

    1. It would be an investment property for a number of years, with the eventual option of living there permanently, and renting out my current home next door, which was my intention all along, once my children were grown and gone. I definitely need to separate the emotion.

    2. The house is down to bare lath on all levels. Definitely not livable in present condition. Partner is ADD and takes on projects like there's no tomorrow; most in the past have not ended well. I haven't seen inside the house which would REALLY help me decide. I'm not sure I can handle it; not sure the partnership would survive it.

    3. Financing would be great if it were just me; with partner, it would be an issue. If the bank requires a personal guarantee as well (versus financing a new LLC), it would fall on me (a single mom with 3 kids heading off to college).

    4. I have no proof of partner's past restoration work. Lots of contacts, lots of talk. I'm trying to believe the best but the skeptical side of me needs some proof, and I've said as much. From the projects I've seen in the past 2 years, he does good work and knows what he's talking about, but I need more.

    5. The land comes with 2 lots, one that the current house is on, and a second one behind it, which is a buildable lot (and no HOA, which is a plus for me). We live in a very desirable location, with great schools. Building a new home on the second lot (with partner's builder contacts) and then selling it would finance part of the restoration of the old home.

    Thank you for the input! That really helps me narrow down my questioning. And helps me formulate the hard questions for my partner.

    Dani

  4. #4
    Join Date
    Jul 2010
    Location
    SoCal
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    5,443

    Default Re: I think we're crazy

    I really see an economic opportunity here, and a possibility of building two new homes, if you can legally divide the lots. But to do so, you need vision, determination, knowledge and...money.

    On the other hand, you admit that you two are too busy to do it. Then you can hire a general contractor, get the construction financing an be on your way. Keep in mind that a GC is not a volunteer.

    As a general and a landlord, let me tell you that this business is not for everyone. I've seen many clueless folks and flippers who jumped in when the real estate tide was rising, then see them mess up and lose all their money. Don't let this property become your money pit.

    If you choose to buy this property, you must act fast, since interest rate is creeping up. If you just choose to lightly fix it and rent it, keep in mind that rentals depreciate a lot faster than residences, they require more maintenance, especially if you get a lousy tenant.

  5. #5
    Join Date
    Aug 2007
    Posts
    6,617

    Default Re: I think we're crazy

    I foresee this as a nightmare waiting to happen. Too many things, from time to money are unknown. The only up side to this is that you're not buying a fixer to live in and upgrade at the same time. You had better have an incredibly strong relationship with your partner to take something like this on, as the stress and workload is going to push you to the limits.

    One very real issue here is that the house is vacant and dilapidated. If you purchase the property, the municipality may require immediate demolition or repair, which means that unless you've got incredibly deep pockets, you won't be able to develop the second portion of the property first.

    How do you intend to partner with your partner over this deal? If you share the financial burden and work together, who is making the primary decisions? If this deal is in one person's name only, what is the compensation to the other during and after the construction? These are details that MUST be laid out and agreed to by both parties, put into writing, and have it notarized, this way if there are problems down the road and a division of the property is necessary, you're both covered.

    Like I said, a nightmare waiting to happen, but doable if you can get all the parameters in line.
    I suffer from CDO ... Its like OCD, but in alphabetical order, LIKE IT SHOULD BE!!!

  6. #6
    Join Date
    Dec 2010
    Location
    Houston Texas
    Posts
    2,510

    Default Re: I think we're crazy

    There are too many other opportunities to use your money on.

  7. #7
    Join Date
    Aug 2013
    Posts
    3

    Default Re: I think we're crazy

    This is it, in a nutshell. We don't yet know what the county has determined with regard to the structure.

    I appreciate ALL the input. Thank you!

    Dani

    Quote Originally Posted by A. Spruce View Post

    One very real issue here is that the house is vacant and dilapidated. If you purchase the property, the municipality may require immediate demolition or repair, which means that unless you've got incredibly deep pockets, you won't be able to develop the second portion of the property first.

    Like I said, a nightmare waiting to happen, but doable if you can get all the parameters in line.

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