It’s Not Always a Nail

If all you have is a hammer, pretty soon everything starts to look like a nail.

This post originally appeared on the Hermit Haus Redevelopment website on 2015-12-31.

This post is my take on the situation that spawned Sue Ann’s post yesterday. We came across a prime example of a deal that is not a good deal for everyone, but we were still able to find a good solution for a distressed seller.

Carol knows a frustrated landowner whose last tenants left his house unlivable when he was forced to evict them. He wants out of the renting business but is willing to owner finance the house.

There is a reason it’s called “property management.” Despite my series of posts extolling the benefits of rental ownership, renting houses is a business. It’s risky, and it’s not for everyone.

Russell, Carol, Sue Ann, and I all evaluated the house to determine what we would be willing to pay for it. At the same time, the owner asked Carol to show the house to another investor who had approached him. Sounds weird, huh? We’re looking to buy a house, and the owner asks us to show the house to a competitor. And we did so without hesitation. Carol is a Realtor®, so that gives us one more tool to help distressed owners find an acceptable solution. So, no problem.

It turns out that the other investor was willing to pay slightly more for the house than Hermit Haus was, because he focuses on that particular part of town. But he still wasn’t willing to pay what the owner wanted for the house. The owner didn’t see either our offer or the slightly higher offer from the other investor as beneficial enough for him at the time.

So what is the best win-win solution?

This trashy image from HuffPo symbolizes the house we evaluated. It isn’t that the problems were so bad, just that there were so many of them.

Let’s step back and look at the house. It’s a four bedroom 2.5 bathroom brick two story with a two-car garage. After renovation, it will be a perfect home for a growing family. Unfortunately, there is that thing about the house not being livable right now. That means a family will have trouble finding a bank willing to finance the house in its current state. But that’s okay because the owner doesn’t want to sell the house outright; he wants to finance it. We can also help the right buyer find funding to rehab the house and increase their equity in it—kinda like what they do on Fixer Upper, but we don’t to the rehab. Luckily, we can put the right buyer in touch with the right contractors, as well as the money to fix it up.

In investor language, that’s called having “multiple exit strategies.” In Hermit Haus terms, it’s called “having the right tools to find the right solution for the problem.” The old saying is holds that if you only have a hammer, everything starts to look like a nail. At Hermit Haus Redevelopment, we pride ourselves on being able to look at the actual situation and find the right solution, not just the one that fits the tool at hand. Depending on the situation, we will take one of six positive actions to help any distressed owner:

• Buy the house ourselves and renovate it to sell
• Buy the house and renovate it to as a long-term hold (rental)
• Wholesale the house to another investor
• Refer the house to Carol to list as a Realtor^®
• Advise the seller on other methods of getting out from under the property
• Walk away from the house and nothing but good wishes for the seller

In this case, our solution was for Carol to list the property as an owner-financed fixer upper. When she finds the right buyer, we will have a good set of solutions for them, too.