I saw an investor offer up a deal that looked something like this:
- Property has Chinese dry wall
- Pool is sinking into lake
- Anyone interested?
Now, in a seller’s market, when there aren’t a whole lot of deals to be had, this might be something worth looking at. If you’re a complete masochist.
Here’s the deal:
Chinese Drywall: All the drywall has to be ripped out. You will probably need to replace the electric and plumbing because the sulfur in the drywall corrodes them. You will need to replace the a/c system. You will basically have a hazmat situation which will involve government permitting and inspections. The house is a tear-down.
Pool sinking into lake: At best,the pool will have to be ripped out because it wasn’t constructed correctly. Or the investor may be able to fill it in. However, more likely, because the property is on a lake, there are probably settlement issues going on. If the pool is settling into the lake, how long before the house starts settling, too?
These are two VERY EXPENSIVE and time-consuming problems to mitigate.
Bird dogs, I’ll put it to you: Why would your investors want to buy a problem property when there are so many properties that are going for cheap that don’t have those problems? Only a new or stupid investor would take on problems when he doesn’t have to.
Your investors are in real estate to make money, not to give themselves headaches. If a property has too many problems or one very expensive problem, then move on to the next deal. There are literally millions of distressed homes and homeowners out there. Yes, some people like to take an ugly house and turn it into a pretty house. But true investors would rather pick up a pretty house that needs little to no work for the same price as that ugly problem house. You are earning your fee to find a good deal, not a problem property.
It’s a buyers’ market. There are tons of great properties out there for the picking. Go for it.