Municipalities across America are auctioning abandoned real estate at very low prices. They often have programs where investors and individuals can purchase commercial buildings and homes for little or no money. But are these virtually free properties really free?
It’s important to understand the potential hidden costs of refurbishing these properties. The hidden expenses can be very costly. An abandoned property is bought “as is” and can quickly become a money pit to the unwary restorer.
If the abandoned property has been condemned, the planning commission can tell you why it was cited. Sometimes, this can be accomplished before the purchase by having access to its outside and reading the citation posted. There will be costs in bringing it up to code.
Asbestos was used in products such as ceilings, insulation, components in furnaces and house paints, to name only a few. Decades ago it was determined that it caused mesothelioma, a type of cancer. As these products age, they can deteriorate, become scraped and further damaged. Particles can break away and become airborne. Anyone who breathes them into their lungs can be subjected to the disease.
It has been illegal to use asbestos contained products since 1977. However, they still exist in many of the older homes and commercial buildings today. Since restoration of these abandoned buildings will occur, these particles that can become airborne should be of great concern. If the products that contain asbestos are in good condition and without any damage, covering and leaving them alone is a safe and cheap option. The EPA has an extensive site that covers asbestos.
3. Structural deterioration costs
Walls, ceilings and flooring can contain water damage and may have rotted or molded. Termites or other pests might have damaged the foundation or other areas. Like termite damage repair, mold removal and remediation costs vary based on the extent of the contamination and damage. Oftentimes it may be difficult to even see the damage until you begin opening up walls.
Electrical wiring may need to be replaced and or repaired. Sometimes, depending on the condition and age, the entire abandoned home or commercial building may have to be rewired.
In years past, copper and metal piping was used considerably in buildings. Over time, the metal piping can rust and break apart. Copper has increased in value and is sometimes stolen from abandoned homes and buildings. It therefore may be necessary to replace the pipes.
6. Back taxes
In addition to construction related expenses, there may also be unpaid back taxes that you will be responsible for as the new owner. It’s important to understand what these costs may be by speaking with the local tax assessor.
Purchasing and rehabilitating an abandoned property can be hugely rewarding and the investment upside can be very attractive. Understand though that it is not for the faint hearted and unprepared. Inspect any property before you buy it and thoroughly research it before finalizing your purchases. You will be glad you did.