Buying Burned Down Houses
Tomorrow morning at 9:00AM I will be purchasing a burned down house from the Genesse County Land Bank. The process so far has been fairly simple. I filled out a form with the address of the house I want to buy. I had to provide a bank statement with at least $5,000 of cash and my state identification card. Shortly after I turned those documents in the Land Bank called me and asked to set up an in-person meeting. Since I live a six hours drive away, I am having my brother tour the burned down house for me while he facetimes me. After that I am assuming the Land Bank will hand me over the piece of land for free. The stipulation, I must tear the house down or improve the property within 12 months of they will take the house back from me.
My goal is to demo the house. I called up a gentleman at the city and asked him if he could recommend some demo guys. He was nice enough to refer me to a gentleman who owns his own demo business. I then called this demo guy. He didn’t pick up, but I left a voicemail telling him I was looking to demo a house.
He almost immediately called me back and we chatted for a while. A good guy who seemed honest was my take. He owns his own demo business and is busy 24/7. There are 30,000 houses in this city that eventually need to be torn down, and he has a portion of the market share here. After chatting he told me that he would go check out of the house I was looking to buy and quote me on it. A day later he gives me a call and tells me he will tear it down for $8,500.
We made a gentleman’s handshake over the phone and then hung up. I was ecstatic. $8,500 for a nice corner lot. But it is not just the price. I own the house across from this burned down place which I am currently fixing up. I recently got a new roof, electrical, working on the windows and then a furnace. It will be a major project. I bought this place for $12,000 cash. And all in projected costs are probably $55,000 to $60,000. This burned down house will hold down the value of the house I own across from it and take neighborhood valuations down. So, me spending $8,500 to tear this house should increase the value of the home I own across the street.
And I know the old lady who is my neighbor is thrilled. She has talked to the contractors and my brother when I first bought this house and kicked the junkies out of it. She must be around 80 years old. Grew up in this neighborhood. Seen the ups and downs and now lives basically in the hood. When I put a roof on the house, she knew I was serious. Then when my brother told her I was going to buy the burned down house across the street and tear it down she was ready to give us a medal.
Here is my long-term goal:
· Buy up as much land as possible in this neighborhood before someone catches on.
· Tear down every single burned down house and sit on the land.
· Own at least 20% of the neighborhood; preferably more.
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And here is the investment thesis behind this:
· This is the last neighborhood adjacent to downtown that still has burned down houses.
· The downtown area is getting investment dollars, industry and development
· In any neighborhood adjacent to downtown, besides this neighborhood, a single lot of land sells for excess of $50,000. I am buying these lots for $8,500.
· All the city’s funds are going to the North area right now to focus on the burned down houses. There is no competition and I don’t think a lot of people are as liquid as I am.
· If I can control this neighborhood, then I can control the future development. I will not only gentrify the neighborhood but should make a ton of money in the process.
· Monopoly was one of my favorite games as a kid. I never lost. I am playing real life monopoly here.
Tomorrow if this process works out and I control the house through demo, I will be looking to purchase at least five more properties with the same intent. Buy from the land bank, hire my guy to tear the house down and sit on the land.
I have already identified three more burned down houses to buy. These three are located on a major road that leads right into downtown. If you want to drive to the downtown district you have to take this road. The city tore down a house recently on this road and now there is a development going up on it. I plan to take down these other three lots. If a developer wants to make a deal, you will have to talk with me.
I am good at buying cheap assets that are blown out. I think this neighborhood and city are so blown out. Anytime I tell people what I am doing they think I am crazy. Some of the best investments I have ever made everyone called me crazy. I think this is one of those. Over the next decade I bet I will 10x my money or more. If I don’t, I will single handily buy every single house in this neighborhood and own everything. Then rezone it and control a mini Howard Hughes.
