Author Topic: It's all gone wrong - lesson learned, what to do?  (Read 2287 times)

2ndCupofTea

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It's all gone wrong - lesson learned, what to do?
« on: February 17, 2018, 05:53:45 PM »
Hi Guys, time to come clean about a failed project and how it has put the whole deal at risk. [long, td;lr at end]
Looking for input of ways to recover, and what you would have done differently.
Raised as a Contractors Daughter, restored 3 of my own houses and helped build dozens so not a greenhorn.

Roll back to Fall 2016: After a brutal contract in LA, I'm just done with Software. Really done. Shoot me in the face.
Decide to sell my Portland house and move to Seattle to be around grandkids. I get 350k or so when the dust settles.
I look everywhere for a flip opportunity and settle on a 220k half acre in a cute distant suburb called Port Townsend,
'cause there is literally nothing else close to that price in 100 miles. It's a hoarder house, estate sale.

I've done those before so np. Empty the inside, the drywall has failed, no big. Oh, ratty insulation, knob and tube.
Do those too. Oh - look at the framing, it's... treehouse substandard. Plumbing needs to be redone.
Go to the City to get a permit, get slapped with a stop work, and they add so many requirements to the 100yo shack
that a new build would have been easier, nicer, and far more valuable. Now, I'm stuck with a terrible investment.

Market is lower than the money in (220+75) and I'm unwilling to go into debt to build new. I ask you smart people:
1) How would you recover from this situation?
2) Is it sometimes better to lose and walk away?
3) Is Washington State no longer an okay place to FIRE?

cheers all.

td;lr - bought a bad house project, got underwater




lhamo

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #1 on: February 17, 2018, 06:22:16 PM »
I'm sorry things turned out this way for you.

WA is not necessarily a bad place to FIRE (no income tax, comparatively low property taxes in reference to places like NJ, expanded Medicaid for those living on low incomes/decent subsidized ACA coverage for those with a little more but not a lot), but the cost of housing in high-demand areas can make it really challenging.

It sounds like you are done with this house -- that you either can't or won't sink more money into it.  The good news is that housing prices throughout western WA have continued to rise -- Zillow just told me that my north seattle zip code is up nearly 20% in the last year.  Could you find a real estate investor or another person up for a project to buy you out?  Is it legal to sell in its current condition?  You might not get back everything you put into it, but at least you would have the hassle off your hands.   Then you could maybe rent for awhile and see if the economics and other things really work for you to stay here.  Or move somewhere less expensive.

If you need to boost the stash for a bit to make up for any losses, at least software has decent earning potential --  I know you said you were done, but sometimes accommodations have to be made when things don't turn out as planned.

SnackDog

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #2 on: February 17, 2018, 07:17:45 PM »
I guess your options are -
1) move in and enjoy it for what it is
2) invest in renovation following city rules, flip for loss
3) negotiate or bend rules if you can, flip for profit
4) tear down and build new and live in with a mortgage or sell for loss
5) consult with attorney to see if disclosures should have protected you better

I'm not sure about your question on Washington FIRE.  I think you mean that you don't like the building codes or their enforcement there vis-a-vis flipping really old homes.  Is that the state or the local jurisdiction which is not to your liking? I'm pretty sure people flip homes in Washington, they just 1) know the building codes and how they will affect the flip cost and schedule and 2) they inspect thoroughly pre-purchase with this in mind. Perhaps you should seek a more knowledgeable partner for this effort since all your experience in California clearly let you down.

good luck!

2ndCupofTea

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #3 on: February 17, 2018, 08:50:22 PM »
Thanks lhamo, I appreciate the sounding board.
The FIRE issue should be moved to another discussion, but I'm a Patches Pal and community was
my greatest motivation in staying in Puget Sound. I'm not sure that Western WA is affordable for frugalists anymore.
I'm 62 now, spent 22 years at the coalface and put 3 people through advanced degrees, so... done is done.

re: Mr. Dog, can't get occupancy without a permit sign off,  so no #1.  #2 is good money after bad.  #3 is illegal
#4 is again time and money to no purpose. #5 Short of having xray vision inspection was done and is not legally liable.
_I'm_ the more experienced partner in the dozens of projects completed, but thanks. (PMP cert)
« Last Edit: February 17, 2018, 09:06:10 PM by 2ndCupofTea »

lhamo

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #4 on: February 17, 2018, 09:15:32 PM »
How far away from Port Townsend is it, exactly -- within town limits or rural?  Can you potentially find an investor who would see value in the land (can it be subdivided?)

What is the rest of your financial situation like?  Do you have enough savings that you could sell at a loss, rent awhile, and regroup/save up again for a purchase later?

If you don't have much in savings/retirement assets, then not working at all may not be the wisest choice.  Have you started taking SS already?  If not, then you give yourself a 7-8%/year "raise" in your SS benefit for every year you can delay taking it up to age 70.   If you can supplement your stash with even part time earnings (maybe your kids can pay you a bit for helping care for your grandkids?) that will help you stretch your assets much further.

I personally would be looking at whatever I could do to get what money I could out of that property and get it behind me.  And then at what I could do at least part time to bring in more income while figuring out longer-term next steps -- would probably rent for a bit rather than buy.   I also personally think it is worth the investment to be able to live closer to family, especially when your grandkids are young.  There are places within an hours drive of Seattle that are more affordable -- you can go as far north as Mount Vernon and as far south as Olympia and still be reasonably close as long as you aren't stuck in rush hour traffic.  Monroe might also be an option.  Or you could look for a small condo in Shoreline/Lynnwood/Edmonds/Everett or Federal Way/Kent/Auburn/Renton.   Housing gets MUCH cheaper when you get beyond the Seattle city limits.     

You may get more useful comprehensive advice if you do a Case Study outlining your whole financial picture.

BTW, I'm from the Patches Pal era, too, though a few years younger than you.   Still a bit nostalgic for those more innocent (and affordable!) days in Seattle....

2ndCupofTea

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #5 on: February 17, 2018, 09:31:43 PM »
Very kind, lhamo. Will send a PM with a few more deets.

On paper, the whole thing penciled out. The in-town lot was supposed to be subdividable (it wasn't) and the location is Fort Worden prime.
The new house was going to be built in ~5 years (not right away) and the plan was to launch a small business that gave me some autonomy.

It'll go for something, but how much less than my investment is not a known number atm. I've done the project file 17 ways, and it always comes out in the minus.
I'm with you on unloading and regrouping, it's just a matter of how grim a Lynnwood rental will be. Gah. And having to listen to a 32yo boss at SomeCorp.com.


lhamo

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #6 on: February 17, 2018, 09:51:22 PM »
There seem to be some not too bad units in the 300k range -- this one is cute, though it is technically in Mountlake Terrace, not Lynnwood:

https://www.redfin.com/WA/Mountlake-Terrace/21305-48th-Ave-W-98043/unit-B101/home/16879181

I have a fond spot in my heart for Port Townsend/Fort Warden.   Went to a Centrum arts camp in middle school and met someone who became a very dear friend who I am still in touch with.

Oh, and I think you may find that the tech culture in Seattle is a bit more laid back than in CA.   At least as long as you stay away from the big A.   My sister was in testing and has managed to work mostly for local companies that have a fairly decent work/life balance.  Helps that her first tech employer was oriented that way, and then after they were acquired she  managed to move to a spinoff where the management tried to keep the same vibe.  Anyway, if you can find a position in that kind of environment working for a few more years might not be so bad.

accolay

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #7 on: February 22, 2018, 02:54:31 AM »
Holy crap! Are you sure you didn't actually buy my current project? Right down to hoarder house, ratty insulation (no insulation really), bad plumbing, and the knob and tube.

"Treehouse substandard framing" Excellent terminology. Exactly what I'm going to attempt to fix this weekend.

I'm going with #2- sometimes better to lose and walk away- sunk cost fallacy. Can you not appeal the city and work with them on finding reasonable solutions to all the problems this house has? What kinds of things are they asking to fix? I'm assuming the place is unlivable in the state it's in now.

Capt j-rod

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #8 on: February 22, 2018, 11:16:27 AM »
I would try to sit down with the city and inspectors again. Describe your experience and show them your portfolio of past projects. My local inspector and zoning guy was a total douche and ran me through the ringer on my first project. You are trying to make things better and sound like you are willing to meet and exceed the codes. Their job is supposed to be to improve the community while doing it to a standard. Sadly when they control the permit they pretty much own the job. I have since done four other properties and have finally gotten through the red tape. The inspectors are pretty laid back and they know I do it right. Hell my last inspection was to send some pics on the phone. They can be and usually are assholes, but they are human.

2ndCupofTea

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Re: It's all gone wrong - lesson learned, what to do?
« Reply #9 on: March 03, 2018, 05:29:14 PM »
Ha @ accolay - I think there should be a nightmare project folder so people can serve as warnings for those that think that upgrading a heritage house if a slam dunk.
I do think it's sunk cost at this point - no use in putting 75k more into a project already 60k over market value.

@Jrod  - I've been in pretty close contact with the wretched Port Townsend City planning dept. I'm far from the only one who has had issues with them and permits in general are a nightmare here, so fair warning to anyone thinking of this small burg.  I'm going to need to find an architect/structural engineer in Washington State to go any further with the beam load path calcs. It's the last hurdle before review.

I want to thank everyone for responding in kind, thoughtful, and sensible ways. You feel pretty alone with this stuff sometimes.
Sorry to have been offline, had to head to Cali for a family med emergency.