Love Austin Homes Investing Blog

Short story: Bought a house that had been moved onto a lot. Intent
was to do major remodel and flip. Inspection was performed at the
time of purchase and there were no major problems noted, except for
the fact that the house is on cinder blocks and is not bolted down.
8 months later, remodel begins. Kitchen sub-floor was torn out
showing the house sitting atop cinder blocks that have been “rigged”
and have pieces of wood between the blocks and the house that act as a
levelling device. (See photos in “Barbara” photo album.) More
importantly, the foundation beams are 12 feet apart, not 7 (8?) feet
per code which is apparent when walking throughout the house and there
are places that “give”. Before remodel can continue, the house has to
be jacked up and have posts cemented in place 6 inches below surface.
Estimates have come in between $4,000-$12,000. Not quite sure just yet
if the foundation beam problem is in fact a problem.

Question: is there any recourse? Is the inspector liable in any way?
The realtor? The seller? Anyone? Or have I just learned my first,
very hard lesson on buying a house “as-is”?
Barbara

ANSWER

Barbara,
Sorry to hear of your misfortune. I buy lots of pier+beam houses and unfortunately, many of them are propped up on cinder blocks, cedar posts, or worse. Many have improper beam spacing, rotting beams, and incorrect shims (they are supposed to be metal, and can only be so thick). If we tore down all of the homes in east Austin with these problems (or not up to modern foundation codes), it would look pretty sparse over there.

One possibility for recourse is to determine what the prior owner actually did. Were they the ones that moved the home? Did they get a permit, as required, to do so? If yes, they would have been required by law to build a proper foundation and have it inspected by the city. If on the other hand, this all happened long ago, and they have just been living in this house as it was for many years, and despite it not being up to code, it was good enough for their uses, then I can’t see that you have much grounds for recourse.

Additionally, you did get an inspection and the inspector did tell you – this house is sitting on cinder blocks, so you knew it had a sub-standard foundation. The sellers could therefore prove that you knew their was a problem – it was disclosed in your own inspection report. Furthermore, I know from my own experience that 99% of home inspectors don’t claim to know much about foundations, and usually clearly say so in their inspection reports. They almost always say “get a foundation expert or contractor to evaluate this further…”. Same goes for septic systems, wells, and a few other items.

So, I don’t know that you’ve got much to work with here, but I will offer one more suggestion - it never hurts to ask the sellers for compensation. I know that I once sold a home with some problems (that I did not know about because I only owned the home for about an hour before a flip). In that case the buyer called me after the sale and threatened to sue me. I basically asked my lawyer if they had a case, and he said “no way, but they will cost you several thousand dollars in legal fees”. So, I offered them several thousand dollars in the form of a “good will” refund, and went on with my life.

You can also sell this turkey to another investor, like me, if you’re tired of working on it

Phill

Needed, Experienced real estate investor to help me learn the
business better. Looking for someone that is a licensed real estate
agent or at least has access to the MLS. The area I am weak in is
knowing what neighborhoods in Austin are good to look for properties
so I need someone that is able to look at a lead on paper and have a
general idea what the deal might be worth.

Getting the leads is not a problem however I need someone to do some
due diligence on them to see if they will be a good lead. I try to
pre-qualify them as much as possible but because of my lack of
experience this is were I need the most help. Not only will the
deals be in both our names, I am also willing to split a percentage
of the deals we close together to compensate for the time and
training that someone will give. Right now I am more interested
in “Flipping” because I need to build up my capital reserves before
I can invest in to properties to fix up. However, I would be
willing to try it.

Thanks,
Tim

ANSWER

Tim,
I frequently partner with new investors and bring experience and $$ into the relationship. I flip a 2-4 properties a month. I also renovate, buy rental properties, and do lots of short sales. If you have some prospects you would like to explore together, let me know.

Phill Grove

UPDATE: I now offer a formal Mentoring program to new investors. Look at www.loveaustinhomes.com and click on the “Training and Mentoring” link.

Phill

Hi,

I was wondering if you can recommend a few “investor friendly”
agents for Austin. What I mean is that the agents should be
knowledgeable on the areas good for rental as well as resale. As all
of you know, we, the investors, look at properties differently than
home owners. Preferably, the agent would be an investor him or
herself.

I’ve been working with one agent who solely works with new houses…
I’m looking for resale at this point.

Thanks in Advance,
Autumn

ANSWER

Autumn,
I do a lot of short sales and normally have 25-35 homes listed at any one time. I also have 6 renovations going and several rental properties. As such, I have searched and searched for the best and brightest “investor friendly” realtors in Austin. Investor friendly is especially necessary in short sales where the deals can get vary hairy and many many entities are involved in the negotiations. These realtors have lots of experience and really know what things are worth.

Here’s my list:

Terry Moore, Avalar (Formally RE/MAX) – 512-619-1229

Shenaoh Peck, Property Consultants of Austin – 512-913-3718 (Shenoah is also an investor)

All of these agents work extensively with investors, including California buyer snatching up rental properties, and locals like me doing shorts, renovations, and rentals. If you hook up with one of them, let me know.

Phill

UPDATE: My full-time patner is Shenoah Peck and works almost exclusively with Investors.

Hello,
I am thinking of buying a condominium to use as an interim place to live for about a year while I build my dream home. However, I have heard mixed reviews about buying condominiums as an investment. The way I look at it is if it has room for increasing value in the near future and the HOA fees are not exceedingly high, then why the hell not? Does anyone have any experiences with purchasing condominiums as investment property that you would like to share so I can make an educated decision?? Thank you in advance.
David

ANSWER

David,
Maybe with low HOA and in a good location… but, in general I say – pass…

As an investor who FLIPS a lot of homes (especially short sales), I can tell you that condo’s are absolutely the hardest things to sell. I have never successfully flipped one, because they take too long to sell. The big problem is the condo fee. As a home seller, I’ve discovered that most buyer’s don’t really care about anything other than monthly cost. As ridiculous as this is, time and time again, the buyer’s don’t care about actual property cost, actual interest rate, fees, etc. All they want to know as their eyes glaze over with detail is “What’s the monthly cost”. With condo’s you pay PITI PLUS condo fee, which at $150/mo +/- often pushes the monthly cost over what an equivalent single family home would cost. I know there are exceptions, and all the folks who love or own condo’s will scream, but I still don’t buy them…

Why not pick up a little house in east or central that has a good shot to appreciate 10% over the next year? Buy the right house, and you live for free

Phill