The Money Pit. A dark legend in the world of real estate, the monster in the closet, the secret fear of all investors.Why do we do it?Why do we pour time and money, blood, sweat and tears, into a
Will you buy a "Money Pit?"
The Money Pit. A dark legend in the world of real estate, the monster in the closet, the secret fear of all investors.
Why do we do it?
Why do we pour time and money, blood, sweat and tears, into a home renovation when the house turns out to be the equivalent of a lemon on the car lot?
Maybe it's because Americans love a challenge. Maybe it's because we're uneducated about what we're getting ourselves into, and too proud to stop when we figure it out. Or maybe it's a secret emotional attachment to the roofs over our heads that leads us to take on these houses that just won't cooperate.
Some people are getting smart. In fact, there's a whole business devoted to those who want to weed out the lemons, and they're ruthless about it when they get going. Professional house flippers, who renovate strictly for resale value and for profit, have learned how to take emotion out of the process. As soon as a professional house flipper sees signs of a money pit, they're liable to bail, cut their losses, and call in the demo team.
But it's not the professionals that are getting in over their heads. The susceptible ones are those buying the Victorian on the corner that caught their eye. As far as they're concerned, it just needs a little TLC. Even if it does have a condemned sign across the front door.
Real estate has always been an American passion, but lately, with a huge boom in the market and an even larger boom in home renovation shows on television, we've become more and more obsessed with our homes. Maybe it's this starry-eyed view on renovation, brought on by television shows where a house can be demolished and rebuilt in the course of a weekend that is causing the problems.
Hidden problems are common in old and defective properties, but smart investors generally hire home inspectors who tell them what might be going on before they even sign the contract. If it looks like too much, they back out. It's the private investors, the people determined to own a renovated classic that get into trouble. And that's not to say they don't hire inspectors. It just means they might not listen to them.
If you purchase a money pit, the results could be disastrous. It could involve crews of grim men with water vacuums and boards and ladders. It could involve far more cash than you'll ever gain back on the market if you decide to sell the thing.
On the other hand, if you have the resources for it, refusing to back down when your house strikes back could be half the fun.
Carlo Gobba began his real estate career in 1996 and has now successfully sold over 1,100 properties totaling over $150 Million in sales. The average agent sells just 8 per year so (this is like havin....