Author Topic: She aint ugly, she just looks that way.  (Read 2586 times)

Le Poisson

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She aint ugly, she just looks that way.
« on: March 11, 2016, 08:00:47 AM »
Still hunting for my first income property, and having a hard time finding places that tick off all the right boxes, but I came across a place that I thought I would ask about here...

The Community - A depressed blue collar town - main industries in town are logging and mining. 
  • 4.5% vacancy rate
  • 65% increase in rental units in past 4 years (a few major developments came online, driving up competition)
  • Current draft plans show 5700 proposed single-family lots in the urban area (housing glut?) - completion dates unknown.
  • average house price $250,000 (This listing is under $100,000)
  • major employment sectors:
  • 1. Health Care & Social Assistance
  • 2. Retail
  • 3. Educational Service
[/li]
[li]8.6% unemployment rate, [/li]
[li]Average family income - $33,000[/li][/list]

At first glance this doesn't look like a prime investment community - and its not. The unemployment rate is tickling the national average, and housing is readily available for cheap at a time when there are shortages in other communities nearby. On the other hand, the employment base in town is diversifying and moving towards research and development where it used to be a one-shot town with resource extraction. It is disheartening to see retail among the biggest employers though.

The house:

A converted town hall with three 2-bedroom units, literally in the shadow of heavy industry. It is on a double lot, and has loads of parking.
The building is partly converted, needing finishing touches, and the price reflects this - in a town that is already low cost real estate.
Remaining renos will likely run about $10,000
One unit is rented already at $1,000/month
By my math, the building will generate about $850/month in income once renos are complete, fully tenanted, 10% vacancy rate. BUT...

It is butt-ugly.

I mean looking at it you'd think graffitti would improve it. The building is a box with tiny windows and tin siding. It is painted grey with green shingles. I am not sure how much effort ($$$) it would take to improve curb appeal, and I doubt it will ever gain much value for resale. OTOH, since I would already need to work on the interior, Putting in windows/shutters, and a coat of pain is doable as pre-tenanting work, and may spruce it up a little.

How much of a factor is curb appeal in getting/keeping tenants? Is it a case of adding windows and paint to make it viable, or is it better to leave the ugly be and keep my cash in my pocket, letting the tenants tell me if it needs more pretty? And is the gamble of a weak economy in a changing town worth it for a place like this?

Rezdent

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Re: She aint ugly, she just looks that way.
« Reply #1 on: March 19, 2016, 09:23:35 AM »
Quality tenants are considering where they would like to live for an extended period of time, and are more sensitive to curb appeal.  Ugly places tend to attract tenants who are either "between" extended stays (possibly to buy in the next six months) or whose options are limited.  This leads to higher than expected turnover and vacancies.
I'm not an expert, but I've increased curb appeal significantly for very little money with paint and plants.  I wouldn't replace windows unless they are not functonal.

The industry and major employers didn't look great.  If you are correct that the town is on the uptick, it might be a good opportunity.  If that doesn't pan out, you could be left with an ugly vacant building in a dying community.  I would be very cautious and do a lot of r3search.

fishnfool

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Re: She aint ugly, she just looks that way.
« Reply #2 on: March 19, 2016, 08:52:44 PM »
A depressed mining and logging town doesn't sound like a good place to invest.

Ugh!

Bigsacks

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Re: She aint ugly, she just looks that way.
« Reply #3 on: March 20, 2016, 07:18:10 AM »
This sounds like a prime investment to me....

1.  Make horribly offensive low ball offer.

2.  If you get it, just lower rents so that you will attract long term tenants who can afford the place.  Poor people NEED somewhere to live.  If the place is solid/decent, it will be better than their other options.

my humble opinion.......

Bigsacks

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Re: She aint ugly, she just looks that way.
« Reply #4 on: March 20, 2016, 07:20:36 AM »
Question...how long has it been on the market?

Also, forget paying $ for curb appeal in this area, people who pay for curb appeal wont live in this area no matter what.  Your clientele is low income people who will love a decent looking interior and will tolerate bad curb appeal. 

PadAdventure

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Re: She aint ugly, she just looks that way.
« Reply #5 on: March 21, 2016, 01:28:32 PM »
Question...how long has it been on the market?

Also, forget paying $ for curb appeal in this area, people who pay for curb appeal wont live in this area no matter what.  Your clientele is low income people who will love a decent looking interior and will tolerate bad curb appeal.

You and I think awfully alike.  I was about to say the same thing.  In these ranges people tend to not care what it looks like.  If the price is competitive, they will knock down the door to get in (literally at times).

I think some of the biggest mistakes we make as investors (in regards to a performing property) is to try to bring it up to our own standards, and not to the level intended.  Without slum lording, of course.