Opening up the old mailbag again, I am printing my response to a recent fixer upper email question that I received.
Hello Terry,
I’m writing you with a somewhat specific question.
I am looking at a house at xxxx Star St. in Duluth, MN. It’s a vacant house (so many are nowdays) and the listing price 39k. Repairs look to be 10.9k plus a fee of 1,100 for re-registering it as occupied.
I walked through the house, visually it’s fine. I like the house, don’t get me wrong. New windows, carpets, paint, etc. But the repairs are mostly plumbing etc. Should I put in my bid for 39k EVEN or throw it down for 29k?
It’s in a fairly low crime area, but across the street is a halfway house for prisoners just getting out into the world…Prior values in the 200k for this area before the Great Collapse….
Thank you for your time,
Malcom
Dear Malcom,
What I see is a red flag that should influence your decision.
The location of the house across the street from a halfway house is going to considerably limit what you can do with the house. Regardless of whether you are going to turn it into a rental or flip it, you have a very limited pool of potential tenants or purchasers. In my opinion, most people would not want to live there.
Consider, if you had a tenant who had a choice to rent your property, or one in another neighborhood nearby that did not have a half-way house across the street. Which would they choose?
Granted, the purchase price is low. However, in my opinion, it’s better to spend a little more money for a house that doesn’t have a glaring defect.
There are a lot of properties on the market right now, and many at bargain basement prices. If I were you, I would consider looking around for another one.
Donald Trump said, “Sometimes your best investments are the ones you don’t make.”
Best of luck in your business.
Best regards,
Terry Sprouse
