Sometimes a property is simply untouchable at almost any price. That is the story with this condo. The property was owned by Reddy Allen, a guy who stole over $90 million from the City of New York, and got away with it. The property was seized by federal government, and transferred to Fannie Mae to be sold. However, between the time when the government seized the property, and when it was listed for sale, the foundation under the building in which the townhouse was located began to sag and crack. The property sat on the market for over two years without any offers.
I came across the property, and made an offer at half of what similar units in the complex were going for, or, $179,000, and the offer was accepted. However, while under contract, I discovered that the township was unwilling to grant a certificate of occupancy as they deemed the unit unsafe for habitation. I hired a structural engineer, and according to the report, there was no problem with occupying the unit. Furthermore, the repairs to the foundation were distinctly the responsibility of the condo association.
With report in hand, I went back to the township and asked for the certificate of occupancy, but was denied. Considering that both the adjoining units were occupied, I told the township building inspector, that if they weren't going to grant me the CO, they should also be placing a vacate order on the adjoining units suffering the same problems. But considering the fact that the units were actually safe, and the fact that one of the adjoining units was occupied by a single mother, that was not a road they wanted to go down. I was able to wrangle out a CO.
With CO in hand, I was able to close on the property. A few strokes with a paintbrush, and a tune-up on the HVAC system, the property was rented under a month from when I closed on it. In the interim, I filed a tax appeal, claiming that my purchase at half the price of similar units reflected the true market value of the property, and had the taxes cut significantly.
Six months after closing (the minimum seasoning required to cash out), I went to refinance the unit. I was upfront with the appraiser and showed them letters acknowledging that the condo association was responsible for the repairs. While it didn't appraise at the $360,000 that similar units were going for, I got an appraisal for $330,000. A month later, I closed on a cash out refinance at $270,000. I walked away with $90,000 over my cost and a cash flowing property in hand. This is yet another story of an untouchable property, that I was able to clean up and capitalized on. Here's another example of why I love to look at the stuff which other people wouldn't touch.
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