Don’t Buy an Odd Ball Cash Flow Property

Fri, Nov 7, 2008

Today a Wealth School participant came to me with a property (house with a garage in the back) in which he could assume the loan from a hard money lender. The owner of the property had gotten into trouble, and was relying on the hard money lender to bail her out.

The participant was eager to buy his first cash flow property. Was this a deal, or a dead end?

So, we went through the challenges with the deal, one at time:

1. Estimated repair costs. From his brief description and what he thought it would take to fix the property, I suspected he was underestimating those costs. For example, he told me the electrical meter was gone. That tells me this is going to be an expensive rehab because we will most likely have to hire an electrician to upgrade the service. This usually means other permitted and inspected work. My recommendation was for him to go through the Wealth School repair estimating unit, and then go back to more precisely estimate the repair costs.

2. Odd Ball Construction. The property has a 4-bedroom house that is almost 2,000 square feet. Because of the small apartment in the back, which needs too much work to repair, the property has almost no yard. There is definitely a high demand for 4-bedroom houses in that neighborhood. However, these are families with 3 or 4 kids. That type of family is almost always going to be looking for a big yard. In my opinion, this problem makes this a non-deal. Avoid buying an odd-ball cash flow property unless you are getting a screaming deal on the property.

This post was written by:

Scott Nachatilo - who has written 96 posts on Financially Free Real Estate Investor.

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2 Comments For This Post

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November 7th, 2008 at 12:29 am

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Susan Kishner Says:
November 7th, 2008 at 12:29 am
Hello.

I like your site and wanted to know if you would be interested in exchanging blogroll links.

Thanks in advance
pressrelease submitter Says:
March 21st, 2011 at 7:26 am
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