I want to do a bunch of posts about property hunting. I am looking for a new project, so I thought I would take you through the steps of finding and maybe even buying the property. The first step is going through the MLS (Multiple Listing Service) and looking at what is out there. When I find something I like, I write down the Listing number. Once I have a list of a few numbers, I call my Real Estate agent (Either Sam Miron or Nathan Copeland) and get them to set up some appointments.
I am either looking for a lot to build a house, or a potential Flip or Rental property. Here are two of the properties I and Sam visited today. This is property #1. It is sitting on 18 acres and has a house. As you can see from the picture it is not much of a house. The only thing salvageable is the foundation. That had no cracks that we could see. We were not allowed inside because the roof was collapsing.
I was hoping the house was repairable because if it is not, the bank will treat this as vacant land, and will only lend 50% of the value. If the house was remotely livable, they would lend up to 80%. My hope for this property was that I could sever off a couple of lots after fixing up the house. The listing agent assured us that no severance was possible. An alternative would have been to maybe put a couple of small homes on it, and sell the houses, but lease the land. That does not require a severance. I have done that before. It is tough to get past the city planner. It is also tough for the buyers to get a mortgage on leased land.
Next issue is the price. The house is worth nothing, and it will cost about $20,000 to $25,000 to tear it down and dispose of the material. (Based on what it has cost in the past) According to several Real Estate agents, who Sam checked with, just to be sure, you would estimate the value as follows. Value of a basic empty house lot for the 1st acre. Then the cost of an acre of land in that area with that zoning. Unproductive land is $5,000 to $6,000 an acre in that area. This is definitely unproductive land. Basic house lots go for $60,000 to $70,000.00. So it would add up like this: Basic lot $65,000 plus 17 acres times $6,000 per acre, Less $20,000 for demolition. That makes the property worth about $149,000.00. Half of the asking price. I don’t think that this one will fly.
These are the views through the back door and the kitchen window. Now you can see why we were not allowed to go in. What would you pay for this place? You can not get every deal you look at, but it is always worth the look. I will be going to the township office and see about severances. Never take anyone’s word for something you can check yourself.
Here is property #2
This is a totally different property. It is on a corner lot in a city. I am working on an offer on this property. From the outside it looks in good shape. But looks from the other side of the street can be deceiving. Once you go in, the place is a chopped up mess of rooms and needs to be completely gutted.
If we are successful on this property we will gut the inside right down to the studs. This allows us to see any structural problems, as well as plumbing or electrical problems. If we want to move walls we will be able to see what is supporting and not supporting. I estimate that the repairs will be about $25,000.00. It definitely needs a new roof on the back.
Examples of the inside of property 2.