This is not going to be for the faint of heart! Anyone who has been buying houses for several years has surely seen some pretty gross ones, and probably some that are complete disasters. So, I thought I would share some of my doozies. This is going to be tough – there are so many!
#1 The Cat House
It is almost a toss up between my top two, but I’d have to give the nod to The Cat House.
I got a call from a woman one day who had a house in Millard that she was looking to sell to a cash buyer, and was hoping to get it done quickly. She told me that she had some recent health problems and was no longer able to keep up with the maintenance on the house. She said it needed a little work and the deck needs replaced. I thought, no problem – that’s my specialty.
When I pull up to the house, she is parked in the driveway and the house looks like this:
Not terrible, needs some siding and trim repair/replacement, probably some new windows. Millard split level houses with 2 car garages are really popular starter homes, so this could be a good project.
She is sitting in her car with the window down, so I get out of my truck and walk over to her car. I immediately catch the unmistakable odor emanating from the house: CAT PEE (this deserves capital letters). She tells me that she is not able to go into the house because her knee is really giving her trouble and she can’t do the steps. I soon discover this is maybe not the real reason.
I open the garage door to enter the house, and I get slapped in the face with the strongest ammonia smell I have ever witnessed outside of smelling salts. It was literally an assault on my senses – I think I might have briefly passed out from the haze of cat urine smog permeating the garage. And I’m not even inside the house yet!
I brace myself, take a deep breath through my shirt that is now over my face, and open the garage entry door.
Just be glad these pictures are not scratch and sniff. There was probably not one square inch of horizontal surface in the entire house that was not covered with cat food, feces, vomit or hair. Did I mention that I had flip flops on?
My initial thoughts were: 1. How many cats were living here? 2. How was a person living in these conditions? 3. Feeling sad for both the animals and the owner who obviously had some issues 4. How do I even go about determining what a house like this is worth?
These are in the “To be read” section
In addition to a cast iron stomach, one of the important skills to develop in the flipping biz is the ability to visualize what a house will look like after all of the clutter is removed. Is the drywall in good shape? What about the doors and trim? I look past the houseful of belongings, trash and filth and determine that the house would actually not be all that bad after it is cleaned out, deep cleaned and the flooring is pulled.
So what could we pay for this and still make a decent profit? As with all houses that we end up buying with the intention of selling, I start with what neighborhood comps (comparable sales) are going for. I research the county assessor site, Zillow, and had our Realtor, Angie, pull some comps from the MLS. From this research, I determine that $185,000 is the ARV (after repair value).
The tricky thing about this particular house was that the owner wanted $110,000 for it, and there were 3 other investors looking at it. The condition of the house was going to make it tough to do a retail flip (i.e. remodel everything and sell to an owner occupant for the ARV) and still make any money on it at $110K for a purchase price.
This is where a good market and a desirable location help immensely with allowing for other exit strategies than just rehabbing and selling retail. One of our favorite strategies to use during a seller’s market is to “wholetail” houses. This basically means that we buy it at a discount, clean it out and clean it, then list it on the MLS at a price where we will likely get both investors and DIY homeowners making offers. A starter house in popular Millard is highly sought after. This would be a good wholetail.
I thought this being in the house was ironic. A collection of videos from the 80’s about an alien that liked to eat cats…
We negotiate back and forth and end up settling on a purchase price of $104,000 and a closing in two weeks.
I immediately get a cleanout lined up. Everything you saw in the pictures above remained in the house when we closed on it – basically an entire 1800 sft house worth of stuff, plus a 2 car garage. Needless to say, the cleanout was not cheap due to the amount of stuff, and the fact that the workers had to suit up and wear respirators. $4000 and 3 days later, we had a cleaned out house.
Next up, tearing out some pee-soaked drywall and subfloor and replacing it, then spraying everything down with urine killing enzyme, all the while running multiple ozone machines (ozone machines work miracles in stinky houses).
Next up was our trusty cleaner, Anna. She is a rockstar! I honestly don’t know why she still answers the phone when I call with some of the cesspools she has cleaned for us.
For $500, she was able to turn this:
Into this:
SERIOUSLY! Even I was amazed at how this turned out. It smelled 80% better too, after all the ozone, disposal of saturated materials and disinfectant. I mean, it didn’t smell like a field of daisies or anything, but we were selling it as a fixer upper anyway, so a little odor is expected- otherwise investors get suspicious. 🙂
Now, the house basically would be a pretty straightforward cosmetic flip for someone. We ended up selling it for $135,000 after 2 days on the market and multiple offers. We ended up netting right around $16,000 after buy/hold/cleanup/sell costs, and about 2 weeks of owning it. I will take that all day instead of sinking $40-50K into it and spending 3 months rehabbing it, then trying to sell it during the winter, and ending up with the same amount of profit anyway.
Update: I just noticed today that this house is currently pending with a list price of $215,000, which is higher than I would have anticipated (albeit 7 months later).
So, The Cat House ended up being a win/win/win. The original owner was able to sell a house that had become a huge problem in her life and was overwhelming her. We were able to use our experience and knowledge to quickly mitigate a health hazard and still make a quick, tidy profit. And the rehabber that bought the house from us ended up making a good profit (I assume) as well. Awesome!
Well, at least you are immune to the Coronavirus now. You have that going for you.
Wow!!! That was terrifying. I’m going to need Ana’s number.
With pleasure! I will email it to you. Thanks for reading, I will have another one post coming out soon!