Potential Property Four #4

Last week I got to take a look at Prospective Property Four #4. We were able to get into the downstairs, but the upstairs tenant was being a pain in the ass and I had to wait until yesterday to see the upstairs unit.

PP4 #4 is a two family property located just a few blocks from my own Property 3. The place is going for $70,000 and both the upstairs and downstairs units are rented out for $650 and $600 respectively. It has a two car garage and the neighborhood is a C+, an upgrade from Property 3’s grade of C. The downstairs was immaculate, and the tenant was a kind Thai immigrant. I forgot to take pictures, but it turns out I didn’t need to. Whether or not I decide to buy the place depended on the upstairs unit, and I was very glad I got to see it.

Messy Apartment usually means Messy Tenant

Both apartments had huge kitchens

The upstairs porch allowed me to see just how rough the condition is on the roof.

Old style bathroom sinks, like the ones in Property 3. Ugly and expensive to fix should something go wrong.

The apartment was a mess, and the realtor let me know that the tenant may be moving out/getting evicted soon. The first thing that bothered me was that most of the rooms didn’t have a built-in light fixture. The lighting mostly came from the lamps bought by the tenant. The bathroom was old school, and not in a good way. There was also no vents/windows in the bathroom, which means I’ll have to deal with mold sooner than later. The porch gave me a good look at the roof’s wood, which is rotting. From the outside it’s clear that the place needed a new roof, but now I know it would have to be a completely new roof rather than a simple re-roof. That’s a $7,000 difference right there.

Like PP4 #3, the neighborhood was an issue. It seems to be on the borderline of a very good area with mansions and the like, but the houses surrounding PP4 #4 were beaten down with crappy paint jobs. The only encouraging news occurred when the realtor let me know the sellers are getting a divorce, and want to sell as fast as possible. I love it when properties are being sold through divorces because they'll usually sell for much less than the asking price. I can definitely get this property for $40,000-$50,000, but the question remains: Is it worth it?  

 Maybe if I were already retired I would buy this property. I’d buy it in cash for $40,000 (sellers like fast cash and would lower the asking price considerably for cash deals over financing deals), then fix it up with about 15k for repairs to the roof and renovating the upstairs apartment, and then rent it out for $650. That’s $1300 every month and, with the low taxes and insurance, I’d be looking at around extra $900 a month. A 20% return on my investment every year would be just lovely! But right now I don’t want the fixer-upper, and I definitely don’t want the neighborhood. Whichever properties I buy have to be in good areas, so that I won’t have to worry about its rentability. I need good money coming in as I pay off Properties 1 thru 3, and my dealings with Property X have taught me that there’s no such thing as easy money when it comes to properties in questionable neighborhoods. Plus I'd have to deal with that upstairs tenant, who looks like trouble.

So, with that, I say no to PP4 #4. A sweet deal for the future, but not what I’m looking for right now.