How do I decide if a property with structural issues is worth purchasing?
April 25, 2012 7:10 AM Subscribe
Property investment filter: How do I decide if a property with structural issues is worth purchasing?
This is for a 50-70 year old home, that is selling for about 15% above the land value. Has been on the market for about 6 weeks (local average is 5 weeks).
The interior of the house is fine aesthetically and can be rented out immediately.
The issue is the foundation has 'shifted' resulting in piers holding the house to have either sunk or become slanted. Mostly because the land is on a slope of a hill, and years of rain water flowing under the house has 'deformed' the earth. The building inspector said it is roughly $3k-$15k job to fix, which mainly involves adding extra support to the piers.
This has resulted in other structural damage: cracked floor of carport, slightly dipping roof, uneven floor, brick cracking at front and rear of house.
Overall the inspector said the foundation-related problems are on the mild side of the spectrum. While important, the house is not going to fall over tomorrow.
Well informed opinions from colleagues are along the lines of: stay away from houses with structural issues, why buy a problem?, don't fall in love with the property, look at the dollars and cents, it hasn't sold for a reason. It all makes sense, but I suppose I have a personal deadline to get my first property within the next 3 months. Been to several auctions in the area and getting tired of seeing them get sold above my bids or potential bids.
Taking into consideration of purchase and maintenance/renovation cost estimates, everything looks fine on my excel sheet, my cashflow would be approaching close to positive in about 1 year. But being a newbie to property, not to mention structural renovation or even development, I am confused about how I can make the right decision.