A couple of weeks ago I had occasion to take three different clients through the same house – an attractively-priced 1967 split-level home just north of Microsoft. So everybody knows that Microsoft will be hiring a lot more folks over the next few years, and a lot of those folks are thinking maybe they should pick up an investment rental in that area – with so much high-income job growth, there should continue to be great appreciation. Great logic. But don’t get carried away by the opportunity.
In this case, the home was priced at $375,000 – for a 1967 split-level home, 3 bedroom, 2.25 bath, 1,820 sf, 2-car garage. All the right specs. Price egregiously low. First, that low price led people to look at the house who were not anywhere near qualified for the price it would actually sell for. Second, that low price led investor bidders to fight over it in a bidding war that maybe should live in the annals of northwest real estate. So here’s what I have heard: the first winner got it for $475,000 – and then failed financing. Seller put it back on the market, same low price, same bidding war (if there were 10 to start with, there might be 9 still standing – hopefully fewer as they realized what it was really going to take to win it). Second winner got it for about $470,000.
Was it a great deal? I don’t think so. Was it a reasonable deal – maybe so. This place was structurally sound, but needed to be completely updated and refinished. It would be fair to say that a lot of the house was original (almost 40 years old) and worn out, including the garage doors – and on and on. The lower level would need to be stripped down to the studs and re-wired and re-sheetrocked. The baths needed to be redone. The kitchen space needed to be reconfigured (i.e. move walls) and then rebuilt. If the new owners are both thoughtful and handy at doing a lot of the work themselves, they will probably come out fine.
If you knew it was going to be $475,000 to start with, you might have looked for one in much better shape and saved yourself a lot of work. Don’t get carried away!