Should you buy now? Is it a Sellers market?April 17,2022First of all, I do not know you, your objectives, or your financial situation, and I am just a guy that loves real estate and writes about it
Find Your Own Cat Pee
Dated: July 3 2019
Years ago, when I first started looking for homes to renovate and either rent out or fix up and resell, I would tell my agent to find me homes that had cat pee on the carpet. You see, I liked homes that smelled bad, were closed up and hot, and had lots of garbage all over the place. I liked homes that most folk touring homes wanted to get out of as soon as they got into them.
I liked them even better if prospective buyers wouldn't even get out of the car to go inside. I liked these things expressly because most end user buyers did not like these same things. They just could not see past the garbage, the un-mowed lawn, and the smell of cat pee on the carpet.
You see, I know how to fix the smell of cat pee. I know how to clean up garbage and re-landscape a house. These are easy fixes. As I became more experienced at renovating houses I added more things to my list that began with a bad smell. I looked for properties that had these easy fixes that turned off other buyers. These turn off's lower the attractiveness of the homes and lowered the price. It made buying them easier for me.
I found a house in San Carlos Park years ago. The previous owner had rented it out to someone that actually raised large dogs IN THE HOME. The house had all the right things wrong with it. The stench was so bad in the home that most people turned away at the front door. It was the middle of the summer and no air was on. It was closed up, hot, and had flies inside. The garage was full of garbage, old appliances and boxes of junk.
The house also had all the right things - location, three bedrooms, two baths, a two car garage, and the yard, while messy, had a good base of mature trees and bushes. The air conditioning and the roof were in good shape (two key expense factors in renovations). The kitchen and baths, while in need of a good cleaning and paint were in decent shape as well.
I bought the house at an excellent price. To remove the carpet I had to cut it into small pieces. It was so loaded with urine and feces that any piece over 5 feet by five feet was too heavy to carry. I then bought an ionizer for around $700 (I still use it today on renovation projects) and closed up the home with the ionizer and the air running for two weeks before the smell was gone.
After paint, new carpet, new switch plates and outlet covers, and I had a gem of a house to sell.
I still look for cat pee in my deals. I no longer buy single family homes to renovate, but what I mean is I look for problems with a property that I know how to fix. You can be especially successful if you learn how to fix problems that others may not want to address.
Last week I put a contract on a piece of land upon which we would like to develop about 20,000 square feet of retail. The land previously had a UST (Underground Storage Tank) from a gas station that was on the site years ago. I have some experience with UST's as I owned a bus terminal that had one. I know the risks and I know the cost of remediation. I was comfortable with the worst case scenario and how to handle it. I mentioned to one of my associates that this was just cat pee on the carpet. His reply was, "Huh?"
That's what reminded me of the cat pee story and was the catalyst for this column. Look for the cat pee deals and furthermore, become experts in different kinds of cat pee, err, problems that can be fixed.
Let me tell you that I have made the mistake of buying properties that had the wrong things wrong with them as well. (I have mentioned before that I have learned more from my mistakes). You can't fix, for example, not enough parking spaces. I bought a commercial building near downtown Fort Myers years ago and ignored this basic fact. For the entire time we owned it we had parking challenges, but it was 100% occupied when I bought it. However, once we had a vacancy it was almost impossible to fill it - we just could not offer the parking to the new tenant that he needed.
Sometimes there is a great quantity of cat pee. I once bought a single family home in Wyoming, Ohio, a suburb of Cincinnati. When I was estimating what I could pay for this fixer upper nightmare, I went through the home and assumed I would have to replace literally EVERYTHING; from the roof to the furnace, to air-conditioning to the windows and all the ceilings. I figured on all new plumbing and .all new electric, new bathrooms and two new kitchens. (It was an 8000 square foot home with two stair cases). I based my offer on these replacement costs. It was turned down and another offer was accepted along with two back-ups.
Three months later I got a call from the agent - by the way she is still working in Cincinnati and still one of the best agents I ever worked with - Karen O'Keefe. She told me that all the offers had gone away during their due diligence period, "would I still like to buy the home?"
I reworked my figures, again assuming I had to do ALL that work, and Karen placed the offer. Later that day I got a call from the seller's attorney telling me he would like to save some time and counter over the phone. I told him not to waste his time. My offer was final, but not contingent on any inspections. I would close in thirty days.
They accepted. They were tired of inspections and haggling. I had identified the cat pee and knew how to fix it and what my cost were going to be. By the way - I was correct in all my assumptions about replacement except for the roof. It was slate and cost me, believe it or not, $80 to fix one slipped piece of slate.
Another side note to this deal was that I was able to get 100% financing because I financed all the improvements at the same time as I bought the house. I did have to put up cash for some of the improvements, and a lot of sweat equity; but at closing I brought no cash. .
Look for your own Cat Pee deal, but keep in mind that sometimes the Cat Pee is not with the physical but with the terms. I once had a seller that would not give me the 90 days due diligence I thought I needed to properly evaluate the property. This was a commercial deal that needed lots of site and traffic analysis, water retention issues and parking problems. There was just no way I could get the answers I needed in less than 90 days. I arranged a sit down with the seller. I found out his problem was that his note was due in 60 days and he did not think he had the ability to rewrite the note. I offered to loan him the money to pay off the note in exchange for the first mortgage and guarantees. I would then be able to take my time to evaluate the development possibilities without committing to the project. I knew no one else would buy at his price with such a short due diligence (The Cat Pee). I knew that my downside was that I would have to sell the property without developing it, but my taking over the note would let me lock up the property at a good price. It was a win win for both buyer and seller. Because I solved the problem for the seller, I was able to get the deal at a very attractive price.
If you need help identifying the Cat Pee in your deals, work with a professional broker, one that has been there, done that.
Real estate has been my passion since I took my first Al Lowery class on real estate investing in the 1970’s. I vowed during that class that I would buy one property a year. Over the next five ....
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