This is nice 2.9 acre property, but the creek run along the road, so the only part of the property that is accessible is a narrow strip between the road and the creek. There is no bridge, and no vehicle access to the larger portion of the property on the far side of the creek. County records show this cabin was originally built in the 1960’s before setbacks from the riparian area were strictly enforced, and when build permits were lax. But the records show that the current owner got a building permit in 2015, but the permit was never acted on, and has since expired. It is doubtful that the county would make a new owner remove the home, but they might not be willing to issue a permit either. The home is clearly in danger of flooding, with the edge of the foundation just inches away from the creek. Perhaps more of challenge will be the location of a septic system. The property is not wide enough to get a septic system far enough away from the creek and not be inside the setback from the street. There are always work-arounds for these kinds of problems, but there might be additional costs and engineering fees that would make this home a money pit.
$189,000 on Lower Banner, where homes can run 3/4 of a million and up, even a tear down might be worth it, but is it? A couple of things. First, the lot itself is just .35 acres, so it’s a small lot, even by Nevada City standards. It has piped city water, so no need for a well, but the home has a septic system, and I heard that the septic has failed. There is no way this lot is big enough for a new septic system, even if the soil percolates well, which I assume it does given the nice tree cover. But the house itself is a wreck. Not even the foundation look like it can be saved. The entire house suffers from bad framing, failed siding, and leaking roofs. There is no plumbing or electrical, that’s all been removed, so the home is stripped down to the studs, but what you can see of that reveals broken member, dry rot in the wall, and pest damage. Everything must go! And did I mention there is an old 1950’s trailer under a shed in the back yard? Not salvageable, it needs to be hauled off to the land fill- add another $5 or $6 K to the cost. There are vacant lots on Lower Banner, not many but this one is not a good a value. Perhaps at $50,000 or $60,000 this one might be worth a second look.
Fixer, is portably an understatement. This home might have been a contractor’s dream, or maybe someone got in over their head, but it needs just about everything. The home may not be structurally sound, the garage, while large, may need to be torn down. There is no indication of the condition of any of the infrastructure. This home is a true “project” house. Is it even worth the asking price of $124,900? Well, actually, the land is portably worth $100,000, maybe a bit less, but even so, if it has a functional septic it might work. Seller say they will carry. It could be an interesting project for the right buyer.
10/15/17 I originally published this post on Aug. 7, 2017. The home went pending to a cash buyer on August 9th, and the escrow closed before the end of the month at a purchase price of $115,000.
Not surprising, the buyer was not willing or capable, or possibly never intended to rehabilitee this property and instead has relisted the property for sale, at a new list price of $147,000. I want to add one more “advertising wrinkle to my analysis that otherwise remains unchanged and is reposted below. The seller today is advertising the property as “sub-dividable.” This may be true. It is a very large lot by Grass Valley city standards, and it is very reasonable to assume that the city would love to get rid of an eyesore like this home and replace it with new, presumably moderately priced homes. To accommodate the profitability of the developer the City would allow an increase in the density so the developer can build 2 or possibly 3 homes on this one lot, increasing the financial viability of the project, and eliminating a blighted in a neighborhood without causing any adverse impacts because the neighborhood is already fairly high density housing. You would think city planners would agree wholeheartedly with the logic of this… You would think that… In fact, I more or less thought the person who bought the property in August might have done some research on this very topic, and that’ why the bought it in the first place… and of course, that might not have turned out to be true, or at least, not as easy as one might think, and that might be real reason they are selling the property again. Don’t know this for a fact, of course, but I will say this, “buyer be ware” is always a good rule in real estate investing!
Well, that’s one way to make money in real estate! Buy low and sell high, as they say.
8/7/17 Wow! Another real fixer. This one is similar to the home on Mill Street, and the one on Main Street which are all in similar condition. A home like this will need a cash buyer, and of course, a contractor. The home may not be salvageable. Simply put, the cost of demolishing the home and replacing it completely may be less than the cost of renovation. The offered price… of $135,000 seems a bit high. What we are trying to do is determine what investors and contractors think the lot is worth. Let’s say the lot is worth about $100,000…. is the home worth $35,000? That’s about the cost of the permits if you demolish the house and build a new one. If you can salvage the house, and not have to pay all the new mitigation fees, then you save about $35,000. A sophisticated buyer, who can look at the house and determine if the home can be salvaged or needs to be torn down, can play the value of the land against the cost of permits for a new house verses the cost of the renovation permits. While costing out permits verses, rehab costs is something a contactor can do, it is beyond the scope of my ability to advise you on whether this is good buy or not. What I can say, is the this is one of about 4 homes so far this year that have come on the market in Grass Valley that are half way between needing to be torn down, and possibly being, in part, salvageable. To look for what can be salvaged, one would need to go the city and see what sort of records the city has on the home, if there were or are any notices of condemnation, and of course, if there are any building permits or an occupancy permit for the home. Just because someone is living in the home does not mean it is a legal residence. That would need to be verified, and of course, professional inspections would be required to determine if there are code and zoning violations and what the city might require to correct any issues that would be associated with the renovation project. Only after consideration of the cost and the along with a estimate of what the home would be worth after the renovation and replacement could a purchase price be established. These are the kinds of decisions made by investors and contactors.
I go look at these homes. I do so, not with the intention of advising a buyer what needs to be done, but only to see what investors see, and get a sense for what these homes sell for when they sell.
It is anybody’s guess how a home gets to be in the condition of a home like this one. There is no apparent reason that a homeowner removed floor covering and sheetrock throughout the home.
It does not matter how the home ended up in the condition it is in, or what caused the owner to lose the home in foreclosure. The home is owned by HUD, and is being sold with HUD requirement than any buyer must occupy the home. That means the buyer must pay cash or get a 203K rehabilitation loan. I think the condition of this home would allow for a rehabilitation loan, but it is more likely that buyer is a cash buyer that happens to have enough money to purchase the home, but probably not enough money to buy a better home. Inheritances, insurance settlements, other kinds of one-time financial windfalls that create a lump sum of cash for person looking to buy, but not enough money to buy a home like this if it were all fixed up- This home would certainly be a high $200,000 or low $300,000 if it were move in ready, so there is quite a bit of sweat equity for a buyer who can tape and texture, paint and put in floor coverings. What a buyer who is not a contractor or investor does not know, is are there any hidden problems or expenses that will associated with the rehabilitation of this home? This one is going to be a risky purchase, but it went pending after just a few days on the market, so somebody is willing to take that risk.
OK, a home gets listed in this price range, on over 1/2 acre, in a decent location, we know the home will be in poor condition, but can it qualify for any kind of conventional financing? A quick look around the outside shows that siding is deteriorated, the roof could be over 30 years old, and the home has an uneven foundation. Notes in the MLS say that the septic predates the use of concrete septic tanks, so the septic has a wooden tank. It may still be operational, but if it ever stops working, it will require the entire system be replaced, maybe with a very expensive pre-treatment system. The inside is in very poor condition. The kitchen is small and dark, one of the bedrooms has no windows. The bathroom has evidence of failed plumbing. While I can’t say the home is beyond occupancy, it is unlikely that an investor would want to take the risk of renting it out, given the likelihood of catastrophic system failures, and the need to put thousands of dollars into repairs. If an owner occupant was look to buy the cheapest possible property and live in it, this property would put them in the same potential jeopardy as an investor. The home might be fine for a few weeks or even months, then one system or another would fail, and the replacement would open up a can of worms. No way to make repairs without getting permits, and no permits unless every issue was repaired to code. Like owning an old car, at some point you are just better off junking the car than fixing it. This one fits with that same general logic.
In my continuing effort to explore the entry level home market and the investment potential of fixers and smaller homes today’s search takes us to two neighborhoods, one is the East Colfax neighborhood in Grass Valley, and the other in North Church Street. In the first video I look at 102 Kendall, a 1 bedroom and 1 bathroom home, just 472 square feet, with one car garage on a about .10 acre. The home has no foundation and lots of deferred maintenance. I shot the video before the listing agent even had a lock box on the house or a sign up, so the video is mostly of the exterior.
In the second video I hop on over to the North Church Street neighborhood to look at 239 June Drive.