The POS House. You know the one. It's the house in your neighborhood that screams neglect. The house that has that sad, saggy sort of look about it. Oh the shame of it all. Where is the pride that was once so obvious? Tree limbs hang from the roof in a panic. One large puff of wind will surely bring them down or at least one would hope. No, the house just sits sullenly, knowing that no one cares a whit. The neighbors pass by shaking their heads in disbelief. “Our neighborhood” they sigh under their breath. “ This is happening in our neighborhood”.
You sigh as well knowing that this house, no this disaster is YOUR disaster. THIS IS YOUR P.O.S HOUSE! How did it come to this? Neglect? Lack of funds for repairs? An unreasonable belief in the goodness of all renters? All of the above?
I can speak to this because this was my house. After a hard fought battle for my investment properties during a divorce and the decision to stay in real estate as a job, I found myself in the unfortunate position of making a decision after a long term tenant left. The home was in shambles and the repairs were going to be in the tens of thousands to repair. What do you do when you can't pull funds from the equity of the home because you are self employed without two years of related business experience? What do you do when your brain tells you that this is your investment and a huge chunk of your retirement? What do you do when you realize you fought for and now own a piece of %#*# house?
What led to this catastrophe will be covered in another segment but let's move on to what decisions had to be made following the discovery of the damage.
My broker told me to flush this disaster down the toilet but being a thorough individual I decided to make sure I was doing the right thing. Here is what I found.
There are three things you can do to maximize your investment in a POS house.
Call at least two or three contractors to give you a bid on repairs. Make sure they are reputable and ask if there could be additional costs not mentioned on the bid.
Hire a knowledgeable real estate agent to give you comparables in your neighborhood. You need to know what the average home similar to your home will sell for fully remodeled, partially remodeled or sold “as is, where is”. What is the market value in your area?
Have your real estate agent help you figure out what the difference will be. In some cases it is a wash but in others the cost to remodel is worth the resale value.
I found that after meeting with three contractors and finding out that I would be trading dollar for dollar I made the decision to sell my POS house “as is”. The result? I listed and sold the property the same day. The new owners are doing a complete remodel and I'm excited to see the result. I'm sure the neighbors are as well.
PS: My broker said “I told you so!”