Your Exceptional Life

Has it been ten minutes? Here are the top three requests I get.

1. I’d like a nice house in a good neighborhood in Hayward for $200,000
2. I’d like a nice house in a good neighborhood in Concord for $150,000
3. I’d like a nice house in a good neighborhood in Oakland for $300,000

Generally the caller would also like good schools. Those three requests have something in common with Santa Claus and the Easter Bunny. That’s right, they don’t exist. The caller has probably heard some story from somebody at a dinner party or at the office water cooler. Housing stories are like fish stories. The home tends to be in a better neighborhood and better condition the more the story is retold. I’ve gotten those $200k homes in Hayward for my clients and I’ve gotten the $300k in Oakland, but the client has gotten dirty getting the home ready to rent.

In other words, you’re going to have to give something up to achieve your goal.

Do you give up cash, location or condition? I would argue that you never give up location, so it’s cash or condition. What are some of the typical condition issues with these homes?

The most common issue is the foundation. That’s what I call a critical issue. Not fatal, but critical. Is the foundation buckling or cracked? Are the floors sagging? Are the walls cracked? Is the cracking major or minor? Is it simply shifting over time? You need to get a qualified professional in there to assess how bad the foundation issues are. My home shifts. I have some minor cracking around a couple of doorways. I live out in Concord where it’s 28º every night for weeks at a time in the winter and then over 100º every day for weeks at a time in the summer. The ground expands and contracts. My foundation is not cracked and the support system under the house is sound. I just live with it. Conversely, I’ve seen a lot of buckled foundations out there, a lot of homes slipping off of their foundations and a tremendous amount of sagging floors because of damaged beams. So many that I’ve added the level application to my iPhone. I’ll walk around the house leaning my phone against walls, floors and cabinets, 3º seems to be the norm for these places. If you’re going to consider a home with these issues it’s imperative that you have a complete understanding of the scope of the issue. Have a qualified professional inspect the site during your inspection contingency period. Don’t guess on that one.

The second most common condition issue is overall condition. I’ve walked into a lot of homes where the first thing I notices is the odor of a roach infestation. To me that indicates a general level of filth in the home. Even if it appears cleaned up, I know that it’s seen better days. But that’s not tragic or fatal, just disgusting. The same with a flea or rat infestation. I had a house last month that had a flea, roach, ant, rat and maggot infestation. I have no idea where the latter came from, there was no host source, but they were there. That house makes me gag, but, it’s not fatal. All can be treated. A lot of potential investors will walk away from that situation because it’s so ugly, yet it’s the cheapest to fix.

Termites and dry rot is another issue. Subterranean are easier to treat than drywood termites. Drywood may require tenting which is expensive. A treatment of Timbor or other insecticide for subterranean termites is not nearly as expensive. And then there’s the damage they did. Did they eat beams in the foundation? Joists? Framing? How much of it? It’s easy to rebuild a porch or steps on a home versus lifting it up and replacing chewed up crossbeams. Once again, seek a qualified professional who can guide you through these repairs.

Finally, giving up cash. As the saying goes “Pay me now or pay me later”. Cash up front can alleviate the condition issues, or cash spent after acquisition can alleviate the condition issues. Some investors chose to not spend the cash at all and they leave it on the table with rent they cannot collect because of the condition of the property. I think they leave it morally on the table by not providing clean, healthful living space. And they pay for it over time. My preference is always to pay for it after acquisition. That way you as the owner can know the quality of workmanship that went into the repair. You know that it is or isn’t going to hold based on how the repair was handled. It’s your investment, and that seems to be the way it should be to me.

Opportunities are still there in this market, but it’s a tough market right now. Personally, I love this market because I have to think out and strategize on every offer and transaction. I have to know where the point of critical mass is, I have to know that it’s going to appraise if we bid it up. I have to know that we’re going to be in the running if my client bids on it or it’s all a waste of time and resources. Patience is king in this market and patience pays off.