Deal or No Deal? The 100 Year Old House

Scott Costello All, Blog 14 Comments

Went to look at a house today that I got a call on from a bandit sign.   In fact the owner of the house lives in DC and got my number when a friend of her’s saw my sign and suggested she call.  I later found out that she had talked to Lance back in December first and then called back this weekend.

The house is currently listed at 329k and has been on the market for 160 days (the contract ends on March 7th).  I did my research and tried getting comps but was having trouble.  The house is on a double lot and is larger then most others in the area.  Plus 3 of the possible 6 bedrooms don’t have closest but other wise are clear bedrooms.   So I talked with Kasey and Lance about getting good comps and the ARV is probably about 370k.

After calling the seller back and asking her a few more questions It became apparent that all she wanted was someone to give her an offer.  Nobody really ever gave them a solid number.  Realtors just asked them how much they thought the house was worth, they have had very few showings and no offers so far.  Originally they put the house on the market for 500k.  The high price was a result of wrongfully thinking that the double lot was worth that much more.  They got no offers and have lowered it steadily ever since with no bites.

Lance and I went out and looked at the house Tuesday night and it is in great condition for a 100 year old house.  They maintained it well for sure.  The only things that I see need to be done is to update the kitchen and baths.  My one main concern is what is behind those old walls.  For anyone who knows, would I have to replace the wiring if it is old wiring?

Lets play Deal or No Deal….

House Details

  • ARV is 370k
  • Repairs 15k (paint, refinish hardwood floors,patching, kitchen update and bathrooms update)
  • 5 Bedrooms, 1 Full Bath and 2 Half Baths
  • Taxes are 10k
  • No Mortgage
  • Small lien on the house used to pay for assisted living for aunt (seller says it’s small and will be paid off with proceeds)
  • Seller needs money to pay for future care for Aunt
  • Double lot that can be divided and built on both (total lot size is 85×100)
  • 100 year old house with plaster walls (some are cracking, what should I look for there?)
  • Contract with Realtor will run out on March 7th (they want to wait till then to do something)

I plan to wholesale the house or maybe even wholetale (sell to retail buyer) it.  After looking at it and talking with Lance I’m looking at about an offer of $240k.   I know they would be willing to do 250k as they said it was within their range right now.

So DEAL or NO DEAL?

Follow me

Comments 14

  1. There are a few wildcard scenarios in this deal. One is the ARV. Comps would indicate that it should sell for 370k. However they’ve had it listed for 330k for 4 months, and haven’t had much action on it. Since the house is in good condition, I see two reasons for that. 1) It isn’t updated — or — 2) the prices have come down since the last houses that were comped. I’m figuring that a ‘quick sale’ price would be around 310k.

    The other wildcard is the electric. A lot of the rooms don’t have adequate outlets, or even any grounded outlets (can’t even plug in a laptop computer to charge it if you were in those rooms).
    Also, the electric panel is 100 amps. Probably needs to be upgraded for a house of that size. Especially when you add in the updates to the kitchen and extra outlets that will no doubt have to be added.

    On the whole, the house is in really good condition. Aside from the electric, and updates to kitchen, everything else is just cosmetic.

  2. Pingback: Real Estate Investing: Should You Invest In A 100-Year-Old House? | Real Estate Investing News Watch Blog Aggregator

  3. $240k seems tight if you are going to wholesale. I’m guessing you’d want to make around $10k. So that puts the rehabber’s price at $250k. Repairs may end up being $20k – you’re going to have to update the electrical, which may necessitate rewiring. And are there any plumbing/sewage issues? No landscaping has to be done? Anyway, with an ARV of $310k and repairs at $20k, that doesn’t leave a lot of room to spare.

    The ARV looking like $370k but with no offers at $330k seems odd. What do other people know about this place that you don’t? Or maybe it’s the time of year also. Less people look at houses around the holidays and during January. Did the seller give you an idea of how many people have actually looked at the place since they lowered the price? Also, what is the curb appeal of the property? Maybe people are just driving by and they are not impressed from the start.
    Well, good luck, it sounds like there is a deal here if you can make the numbers work.

    1. The seller said that they have had very few showings the past 90 days. They have had two open houses and only 3 people showed.

      To me the curb appeal seemed pretty good. Very cleaned and looked maintained.

      It’s on a dead end street, so the only people driving by are those that live on the street or visiting.

      The more I look at the house and talk with people, I agree 250k is to high of an offer

    2. The seller said that they have had very few showings the past 90 days. They have had two open houses and only 3 people showed.

      To me the curb appeal seemed pretty good. Very cleaned and looked maintained.

      It’s on a dead end street, so the only people driving by are those that live on the street or visiting.

      The more I look at the house and talk with people, I agree 250k is to high of an offer

  4. Scott –

    Having owned and operated a successful home inspection company for 17 years, I can tell you that you absolutely should have a home inspection on a house 100 years old.

    If the plumbing hasn’t been updated throughout that will be a costly repair. You may find that when you do updates in areas that have plumbing such as the bathroom, these areas may not have proper venting for the plumbing.

    Lance is absolutely correct about the wiring. The wiring in those old houses is functionally obsolete in most cases, and it won’t meet today’s electrical needs. It may also be dangerous. If you get into rewiring this house, you will likely get into repairing the plaster in areas.

    I would allow a much larger “fudge factor” on a house this old. You can bet it will cost the rehabber more than he expects to do the work on a house of this age. The older the house, the more surprises!

  5. Hey Scott, this sounds like a property I looked at on 2/15. Is the property in Essex county. If so this property has it UPs & Downs. I will explain my observation if it is.

    1. Very much appreciate your input on this property Duane. This is a prime example of why I like blogging about potential deals.

    2. Very much appreciate your input on this property Duane. This is a prime example of why I like blogging about potential deals.

  6. Scott-

    Couple of thoughts:
    1) The lien amount that is outstanding needs to be looked into and how much is it exactly as that will impact your net profit line once you label a wholesale price on the property.

    2)MikeG good thought analysis. Another impact Scott you need to think about is risk/reward analysis for the end investor so that will involve an analysis of trends of the submarket i.e. DOM, Technical Indicators of Price/Rent Ratio

    3)To ascertain the value of this asset if the comps are dubious then utilize a direct one year out discounted cash flow approach of the rental numbers with a inflation uptick divided by a discount yield

    Cheers

    Ankit Duggal, MBA, MARED
    Investment & Strategy Director
    Twitter @RERLLC

    1. I found out some more info on the lien. It increases by 4 k every month and the owners have been told by the assisted living establishment that they can pay off the lien with the proceeds of the sale. Total lien now stands at 8k. What are your thoughts on that Ankit?

Leave a Reply

Your email address will not be published.