digest
Short Summary
Main recommendation: Buy distressed properties in desirable neighborhoods that are cheap because of cosmetic or condition problems, then rehab them, since location outweighs a house's flaws. The speaker bought a house listed at $465,000 for about $365,000 in a strong neighborhood despite a severe smoke odor, an aging in-ground pool, and a poor floor plan.
Key Points
- Location is the deciding factor: the speaker says the house's many flaws were outweighed by being in one of the best neighborhoods in the city.
- The discount came from a motivated, somewhat desperate seller and buyers who wanted move-in-ready homes and would not take on work.
- Heavy problems such as 40 years of indoor smoking, which was not disclosed in the MLS listing, scared off many visitors who were turned away by the smell.
- Pool costs were overestimated by inspectors: a $25,000–$30,000 repair estimate was reduced to about $5,000 by demolishing the pool.
- The speaker's original rehab estimate was $50,000–$75,000, and the scope grew after purchase, but the basic rehab could have been done within the original estimate.
Details Worth Noting
- Concrete instructions:
- Learn your city's market: know what is selling, at what price, and in what condition; identify desirable neighborhoods and price points, and also identify areas that are not selling.
- Tour everything: attend open houses in target neighborhoods, look closely at each house, and note what you like, dislike, and would change.
- Learn to estimate rehab costs by walking through a property, building a rough budget before you buy.
- Get a pool cost reality check: rather than accepting an inspector's repair estimate, compare it with demolition costs. The speaker noted that a jackhammer rents for about $75 a day, and crushed concrete can be dumped into the pool to reduce the dirt needed to fill it.
- Wait for the right deal, and be ready to act fast when it appears.
- The speaker bought this house a few years before the spring 2022 price run-up and said it was the lowest-priced property in its neighborhood that year.
- Interest rates have risen since, but the speaker's point is about buying well below market, not about financing.
- Colorado's swimming season is short (Memorial Day to Labor Day), which the speaker cited as a drawback of the in-ground pool.
Bottom Line
Buying a cheap, ugly house in a top neighborhood can still create strong value, provided you do the homework on the market and realistic rehab costs before making an offer.
