Smoke and Mirrors: Things to Consider When Buying from Smokers
You’ve been trudging through the barren desert of unprofitable homes for months now…then suddenly, the clouds part and a single ray of light spotlights the ideal home you’ve been searching for all this time. It’s in a fantastic neighborhood, it’s going for a discount price, it’s perfect!
However…the previous owners were smokers.
And not just the “one cigarette a week smoked outside while satisfying cravings with nicotine-infused vaping” kind of smokers…They’re the hard-core, Al Capone smoking two packs a day and a cigar after dinner kind of smokers. Everything else about the home is too good to be true…so what do you do? Like all of the other homes you’ve researched for the past few months, is this deal destined to go up in smoke?
There are a few things you need to take into consideration before going out on a limb to purchase a home previously inhabited by smokers:
Restoration Costs
As a smart investor, you’re looking at the bottom line: what’s this going to cost me? Unfortunately, the time and money spent to remove the residue from the home can run up a huge rehab bill.
In the best-case scenario: All of the walls, ceilings and floors in the home will have to be scrubbed thoroughly and repeatedly.
In the average-case scenario: You will need to wash all walls, ceiling and floors, plus prime them with a stain cover and give all of the surfaces two or three fresh coats of paint. Also carpets, drapes and blinds will have to be professionally cleaned.
In the worst-case scenario (which is what you may have to end up doing anyway): Professional cleaners and restorers will have to be brought in and carpets, flooring, drapes and blinds will have to be discarded and replaced. If you were planning on gutting and scrapping everything anyway and it’s in your rehab budget, then it wouldn’t be too big of an issue to remedy.
Potential Health Hazards
We’ve heard of first-hand and second-hand smoke, but believe it or not, a lot of damage can be done from the presence of third-hand smoke. Third-hand smoke refers to the sticky residue containing nicotine and other harmful substances. This residue is guaranteed to coat all of the walls, floors and surfaces of the smoker’s home. If this residue is not completely removed, it can be re-emitted into the air through a process called “off-gassing.” Children, pets and those with smoke allergies are particularly vulnerable to this residue; in addition to inhaling these dangerous chemicals, they can also be ingested through touching. Third-hand smoke-related issues include cancer and liver and lung damage.
What’s That Awful Smell?
In addition to the deterrent of potential health issues, more often than not a simple bad smell can send potential home buyers running from a home faster than vampires from garlic. The nasty smell of tobacco can linger in a house for months after the last cigarette was stubbed out. Smoke particles can attach themselves to almost any surface and attempts to mask the odor can oftentimes prove futile.
Dorene S., a real estate agent from California, had a terrible experience trying to sell a smoker’s home on the market: “Smoking inside the home does cause issues for many potential buyers. It’s also very difficult to remove the smell. It can ruin a potential sale when the buyers says, ‘No, thank you!’ I had the ‘dubious pleasure’ of trying to rid a rental property of the smell once. We had to wash everything including the light fixtures, door knobs, light switches, window frames, and it was even on the light bulbs! Then the carpets had to be removed and replaced, and the floor scrubbed underneath them. The entire place had to be repainted and we were still not completely satisfied when that was done.”
As we mentioned before, you’re most likely going to have to throw everything out and start over from scratch.
Burned, Baby, Burned
Most hard money lenders won’t lend on properties with extensive fire damage, but what about the minor damage caused by cigarettes? This will prove to be a huge and expensive inconvenience to your rehab since many smokers don’t always use ashtrays. Carpets, counter tops and bathroom vanities can have permanent damage caused by cigarette scorching. Be sure to inspect your property for said scorching. Most likely, you’ll find a ton more of it than you anticipated and will need to replace even more items than your rehab budget calls for.
Resale Value
A 2013 Canadian real estate agent survey showed that smoking can reduce the resale value of a home by almost 30%. 88% of real estate agents said that it is more difficult to sell a home previously occupied by smokers and that 27% of their clients wouldn’t even consider buying home in which a smoker has lived.
Buying a property from a smoker can be far more trouble than it’s worth. The rehab costs can be astronomical, not to mention the health risks and betting on odds that stains, smells and scorching may never come out.
However… remember that the numbers rule in the fix-and-flip game.
If the property is in a highly-desired neighborhood and is going for an extremely discounted rate because of the smoke and nicotine residue, you could add more to your rehab budget to cover extra paint, carpet, flooring and surface replacement. If the home is being sold for $40,000 and the after-repair value is $200,000, you could pack a pretty penny into that rehab budget and still qualify for 100% financing.
…What’s that we said about 100% financing?
It’s what sets us apart from the other hard money lenders out there. Believe it or not, you can get started on your next fix-and-flip property with $0 cash to close if it's a great deal! Imagine no monthly payments and no cash down on the table to close a deal – a deal that will net you an overall estimated profit of $30,000 or more! These kinds of deals are funded all the time at The Investor's Edge.
See how it all works by attending our next webinar.
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