Monday, August 23, 2010

So, another day in real estate. Today's victim was a four-unit (listed as four two-bedroom apartments) apartment building in Cumberland, MD. Originally a single family home, I'm guessing the owners were annoyed when the neighbors built a house two feet away, and retaliated by building an entirely new house in their back yard. Their entire back yard, except for the shed in back, which they built up to.

So a two-story house with finished attic extends to the rear (and with an alley) into a three-story addition containing two two-bedroom apartments (with microscopic kitchens) and an extra bedroom for the now subdivided first floor. Worse, somewhere in the 80's, it appears the owner decided they were really tired of paying for the gas-fired boiler for all the radiators in the building, and replaced them all with electric strip heaters which would instead go on the tenants electric bills. Nice. Cheap. Mean-spirited.

Worse, almost all the radiators have been removed and all the interior supply lines removed, only the forest of piping in the basement remains. The ductwork from original (presumably) coal-fired furnace has also been removed, though the original registers remain, some containing phone lines. All that was surmised from the listing and photos. What wasn't was the sad state of most of the plaster. I immediately subtracted $10K from the price I was prepared to offer. The two places where water (previously) had obviously come through the roof appear to be corrected, but may require further repairs, and all the damage remains. The plaster in most areas requires repair or replacement.

My original assessment had been: It's selling for $45K, I'll offer $40K, on the assumption it needs four new kitchens and four new baths, new wiring, some new plumbing, and some plaster repair. After the tour, I still like it a lot, but it needs extensive plaster repair or replacement, all that other stuff, and inspections on the roof and chimneys with likely repairs to follow. And a likely dismantling of the entire radiator supply piping system. Two windows in the wall facing the neighboring building (blank wall) need complete replacement or filling in. Two doors in the "court of doors" where the alley ends need removal. The back wall that was built against the existing shed needs work.

I walked in sold and looking for reasons to run away. Replacing a whole lot of plaster is straightforward, but not inexpensive. So $12K was the figure dancing in my head -- my quick estimate of how much it would take to rerock all the areas where the plaster needs to be replaced. Not an expert, in about 15 minutes, that's my assessment.

We eventually got past the bad and into the weird. The third-floor attic in the old house is finished, at least in part. Call it thirds. The first third, the front room, is finished, but with some poor plastering detailing. it's backed by three short closets, which are finished, to a degree, as the roof slopes downward. The joke of "this is where we keep the children" seems odd when you find large, short, carpeted closets off the third-floor attic. Proper attic crawl space behind the mini-rooms. Could be turned into storage, but even as storage, should probably be returned to unfinished, unconditioned space. We weren't able to get past the steel door and lockset on the rear addition attic, but I expect a crawl-space again.

So the long and short of it is that I'm in the process of making an offer. My agent believes that they're likely to take $30K for a property listed (in foreclosure) at $45K, or at least not say "fuck off." My estimate is that if I invest the purchase price, plus another $50K over 2 years, plus one day a week and one weekend a month (on average) for two years, I'll have a property that will rent four units ranging from $600-$800 per month, and not need major updates for another 30+ years. If that estimate is correct, I'd invest (roughly) $80K over two years, and recoup (roughly) $800K over 30 years. So, my opening offer is $30K with seller paying closing costs. If they bite, I'll buy. If they negotiate, we'll see.

Now, the omen. For a four-unit building, you can imagine there'd be a lot of keys. Two separate lockboxes, in fact, though the listing agent claimed ignorance on the combination the the second box. Magically, once we'd discarded the provided keys and just started fucking around, I found the key to our condo building in Silver Spring (!) unlocked the door the  the front upstairs apartment.

Let me get serious for a moment. Cumberland, Maryland, is the fourth most resilient housing market in the US. Which isn't to say the recession hasn't hit the area hard, but that the area has been in decline since the middle of the last century, and let's just say the current economic collapse didn't really do much to drive them further into the ground. So I'm looking at a foreclosure property with an assessment of $90K, a listing price of $45K, and I'm offering $30K with the prospect of more than doubling down. The floor for 2-bedroom rentals in downtown is $500/month. I can work this. With style, and possibly even flair.

No comments:

Post a Comment