OfflineI went and looked at 5 houses today. Two of the houses were foreclosures and in the same neighborhood. This is a new neighborhood as of 2005 and a mile from the high school and elementary school. I wrote down all the flaws of the house's and what needs to be done for it to be market ready. The biggest issue with both of these houses were that they had black mold in the basements. It was really bad and seeing that, I am wondering if these properties would even be worth making an effort to buy since I know black mold is bad for your health and it can cause a lot of problems. I can obviously use this as leverage in my offer price but I want to make sure, before offering anything, if this is a problem that can be completely taken care of without any back end issues later down the line. My goal is to buy these houses and get them back to market condition and rent them out until the market begins its next up swing. These houses both sold for $300,000 4 years ago and are currently on the market for $144,000 and $189,000.
I appreciate everyone's help.
what state are you in? are you sure it's black mold? i'm in Indiana and usually our mold isn't the bad kind, but it's still gross. if you have a company nearby that does restoration (for water and fire damage, mold remediation, etc.), you can call them and have them come out and assess what needs to be done and how much it will cost you. we just did that with some clients and it was going to cost them a lot, but that did not scare them off. the company did not charge for the estimate. you also need to make sure they are certified to deal with lead paint issues, if that is a federal ruling. i know here in Indiana we can only use certified contractors for lead. hope that helps some.
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I am in Maryland. As for the lead paint, these houses are both 5 years old and I don't believe they have any lead paint restrictions. I have called a few companies and they referred to another company to do the assessment because of the severity of the mold. I will set up the assessment and then they apparently will tell the local ServPro what to do and what needs to be done. It seems to me as if this will be a fairly large expense. I appreciate your response and yes every little bit of advice helps. Thank you.
You mentioned that you will buy, fix and rent the properties. That is a definite strategy and does work. You must look at several factors. Will buying those properties tie up too much of your credit? If so you will need to change strategies for any future deals. You also need to be sure the rental income will pay all the expenses on these properties. You don't want to have to subsidize payments out of other income. A rule of thumb is that rental properties usually won't cash flow if the debt on them is over 60% of thier FMV. Always run the numbers to see if the deal makes sense as an investment. Investment is the key word- you won't be living there so don't buy it because you love it, buy it because it makes you money. There are too many great deals in the market today to take on a marginal deal.
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If its in the wood or sheetrock, it can be replaced. If its in the foundation, ammonia can clean it away and unless it is in toxic levels, the price is really not going to be affected.
"My goal is to buy these houses and get them back to market condition and rent them out until the market begins its next up swing."
Not a good thought process to have; thats the eqivalent to saying, i'm going to keep taking a loss until things get better and then start making money. If its not makng you money or covering costs from day uno, pass it by.