The Lazy Mentor's Reference Journal
"If you're not embarrassed by your offer, then you offered too much"

 

Room With A View

Room With A View
3/21/2004

I called on an ad last Friday.  A lady had two duplexes on the same street in a nice part of town. Rents were $700 x 2, and $625 x 2, and she has two vacancies.  She wants $190k for each one.

Sounded high for the income, but maybe rents could be raised.  So I drove by them.  One was a dump. A tiny bi-level duplex in poor condition, air conditioners in every window, and a carport that had aluminum siding tacked over the roof for some unknown reason.

The other duplex was directly across the street.  It was a beautiful 2-story with a 2 car garage.  (She lives in this one.)  I have no idea why she thought she'd get the same price for both.  (I looked it up online, she paid $140k each 5 years ago.  This is about the max I would pay for them now.)

 

Anyway, the street was nice.  All owner occupied single family homes about 20 years old, and average selling price of around $160k.  And there was a new development on the end of the street with nice homes in the $250k range.  Perfect neighborhood.

Then I turn the corner and BANG.  The bi-level is on a corner lot.  The street behind it has six 12 -family buildings.  The back yard adjoins one of the buildings.  The two-story duplex is right across from this small street, so you open the front door and all you see are apartments in disrepair.

No thanks.  No way could I raise the rents.  The apartment complex smelled of unsupervised kids and hot rod cars.  I wouldn't want these duplexes at half price. (Well maybe half price, and then flip them.)

I try to buy the worst house in the best neighborhood, but there are exceptions.  I don't want any major problems that the other neighbors don't have.  The house must be sound and the lot must be as valuable as the rest on the street. No structural problems, no railroad in the back yard, no huge power line towers, no ugly views (commercial buildings, etc.).

 

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