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A few years ago, I purchased a home at $142,000 that has 12 bedrooms, 4 full bathrooms, a workroom, a basement with cement flooring, and an attic. In my divorce, it was awarded to me, as my ex was unable to secure financing in her name. She no longer has a claim on the home. I now owe $130,000 or so on the mortgage. It was listed at approx. 2500 square feet.

Since then, shortcuts in repair were found that have caused damage. They are things I believe an inspector would have caught, but my ex sigh rushed us into the purchase because of the deal for the space. Other damage has occurred just from living in the home, such as a need to recarpet. In actuality, the total living and storage space is closer to 5000 square feet.

I want to sell this home/marital doom trap, but don't want to end up with an owed balance. The following problems exist:

  1. There is a humidity issue caused partially by bad plumbing. While the house was plumbed with PEX, it wasn't done right. The 2nd floor shower drain has a pipe which does not seal to nor does it cover the drain, causing water runoff to drip onto the ceiling of the first floor master bathroom. This has eaten a hole in the ceiling there, and the mildew is real. Further, the connected main bathroom on the first floor is unusable due to severe mildew and leaks from the cabinet; much of both will likely need to be torn out and re-walled, as well as the plumbing repair. The basement full bath has broken seals that I was able to repair, but the water needs to be restored to the room and the soundproof panels (why in a bathroom? Really?) need to be replaced with something solid.
  2. There is a tree in the front yard which has a root that has pierced a connection where the air conditioning unit and plumbing drain their water. The tree needs removing so the pipe doesn't back up every couple of years.
  3. The basement and attic require insulation, drywall, and some way to complete their flooring; the attic has wood baseboard with insulation beneath it, and the basement needs a ceiling installed over the support beams. Doing so would up the house to at least 4600 countable square feet.
  4. The HVAC from the central heat and air unit connect well on the first two floors, but do not provide enough power for the second two. I discovered that a "vent" was actually an access point for a powerful fan that once vented the heat from the second floor into the attic, but its wiring has oxidized due to the moisture issues. The ductwork exists, but a second unit in the attic would be needed to completely provide for the space. I currently use two powerful window units in the upper floor on the street-away side to cool that floor.
  5. The basement water sealant is the cheap stuff and has begun to bubble through the painted cinderblock on the side with the most earth. I have a quote to install an internal drainage and pumping system for about $6000 to resolve the issue causing it, but the bubbling must be covered or otherwise repaired.
  6. Some of the wiring in the walls needs to be re-run, as oxidization has killed a couple of the outlets. This is particularly true if the outlet shares a wall with a bathroom.
  7. The windows are metal-framed industrial glass windows instead of wooden-framed windows, and some of the weather sealing is shoddy.
  8. The faux hardwood laminate floor in the dining room has permanent stains.
  9. The back door shifted since it was initially mounted, and the deadbolt no longer meets the jamb.
  10. The wood rear deck and front stairs that lead to the entry doors need to be replaced entirely or just removed and replaced with concrete.
  11. Obviously, all of the place which has carpet needs new carpet. That's mostly normal wear and tear but includes some animal waste that was cleaned out of the carpet, but may have gone below.
  12. The laundry room has two washer and two dryer connections, and connects gas. Unfortunately, the floor is slightly off-level. This room has more wood laminate.
  13. The driveway is gravel, until it goes past the rear fence. At that point, it looks like paving began around a basketball hoop but was never finished. It will probably have to be jackhammered out to restore the yard, or completely redone all the way back out to the curb.
  14. The telecom wiring is all 2-line telephone and only leads to two rooms. I would like to run Cat5e or Cat6 to all rooms, as I heard this is a cheap way to jump house value. I can do that myself, but if the walls have to be torn open anyway, I'd rather have someone certified in low voltage do it.
  15. The curtain panels snapped open on one of the upstairs window units during a storm, causing the room's carpet to soak up water. The carpet was cleaned, but I haven't seen the subflooring there.
  16. Obviously, repainting needs to be a thing. For the size, I'm wondering if it's a better plan to have someone respray the walls like they do in apartment complexes and commercial buildings than to do it myself with paint and brushes.

I'm a little torn on what to do, since this is a lot, but at the same time, I know it could be a profitable flip or even duplexed and rented out for well above the mortgage (1k/month). I'm at a total loss on what loans would be required, especially since my credit is currently at the high end of fair. Unfortunately, the only thing to get into "good" credit I can do is wait two years for my post-housing-crash-bankruptcy to be off my credit, and that's not so much an option. I make less than six figures, but I'm well above the poverty line. Unfortunately, I'm a father and my son (of whom I have custody) is a teenager, so cash on hand is very low.

What is my best financial approach to get out of this place? What loans are the best to go after for the work? The house isn't one of those "nightmare, sure we can flip it" deals from a bad TLC show...is it?

This house is in major city limits in East Tennessee, USA, is solid oak construction underneath the mess, and sits on a quarter acre with cemetery-owned undeveloped property behind it.

Edit: "Cut and Run" answers will not be accepted. From what I can tell a short sell would leave me with so much debt that I'd be in the same boat but less one building.

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    So you're living there presently? What's your timeline? Do you need to move out, or could you chip away at repairs and sell in a few years? Without good credit and renovation experience it could easily be a big expensive mess. – Hart CO Apr 17 '18 at 0:40
  • It is my current residence, and we need to move out. In the current condition, I'm not sure it would even sell, much less sell for enough to get away from the debt. I'm willing to generate debt to do the work, obviously, but I would obviously want to profit enough from the flip to come out clean in the end. The intent is to buy somewhere else halfway across the country when all is said and done. – CDove Apr 17 '18 at 9:59
  • What about timeline, how soon do you need to move out? It could be worthwhile to fix up in the right market, but your average first-timer is rarely ahead of the pros. – Hart CO Apr 17 '18 at 14:17
  • Summer 2018 is the target. I can still own the place but I need work happening at that time. – CDove Apr 17 '18 at 14:22
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First off this house is a very odd configuration. Twelve bedrooms and three baths in a 2500 sq ft home? The bedrooms must be pretty darn small.

These things are key to your question:

...I'm a programmer, not a DIY guy.

...but my ex sigh rushed us into the purchase...

First off, money in real estate is typically made at the buy, and it sounds like you guys bought poorly. The only thing you can do about that now is lick your wounds and learn from your mistakes.

The list of repair items would be daunting for a general contractor let alone a guy who is not DIY. You are best to concentrate on your career, not learn how to be a general contractor.

IMHO your best bet is to dump this house ASAP, and move on with your life. Getting a loan will only increase the cost, pain, and suffering associated with this property.

This property could be very attractive to the right buyer.

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    A 3500 sq ft home typically has 4 bedrooms. This sounds insane to me. – JoeTaxpayer Apr 17 '18 at 11:29
  • A 12 bedroom house could be a great property to own in a college town. – Pete B. Apr 17 '18 at 11:38
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    I have to agree with this - don´t throw good money after bad. – Daniel Apr 17 '18 at 11:51
  • The bedrooms are all at least 12 x 12, except for one that is only about 8 x 6. It was a house built by a small religious sect. Before they could sell it at all, they had to remove pews from the great room. I think their reported square footing completely ignored the 3 bedrooms, bathroom, and workroom attached in the basement. That's why I said "finished" it doubles the square footing. Also, I would rather hire someone to do the work than do it myself. – CDove Apr 17 '18 at 12:00
  • Agreed: sell it. This property may have potential given the right repairs, but you just don't seem to be in a position to fully tap that potential. – chepner Apr 17 '18 at 14:27
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What is my best financial approach to get out of this place? What loans are the best to go after for the work? The house isn't one of those "nightmare, sure we can flip it" deals from a bad TLC show...is it?

We can't reasonably assess the potential upside/downside. Two of the big common mistakes inexperienced renovators/flippers make are not having enough money and/or enough time. Likely your best option for turning it into a peach would be to chip away at the updates/repairs while living there.

Given your need to leave soon, here's my take: If the potential actually exists someone should be willing to buy it as-is. I would try to sell it now, maybe hunt down some local house flippers and/or list it for-sale by owner and see what happens. Easy and no real down-side to try. Meanwhile, you could certainly get some opinions and more estimates from local professionals, probably start with a proper inspection if you haven't had one yet to know the full extent of what needs to be done. Then talk to some lenders (I prefer local credit unions, but shop around) and see what you can qualify for. With low equity you may need some other collateral to secure a loan. You may well be in a position where the amount you can borrow won't come anywhere near what is needed for the repairs. In which case your options become very limited.

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Maybe between you and your son you can do some of the cleanup and sell it as a fixer-upper. It might be fun for you two. Tear out the rotten ceilings and the like. Fix the mechanical and plumbing issues and run Cat6 like you mentioned so that a buyer can see that it has good bones. Maybe just focus on fixing up a small portion of the house so that it is livable from day one and has potential for expansion. The cleanup will probably take time but compared to finishing the whole thing would be relatively cheap. But basically, maybe it will be worth more gutted. Hopefully a potential buyer would look at it and see potential rather than all the damage.

It might be risky to start tearing things up. It may not sell. You don't know what you'll find. But, if it doesn't sell right away, you can finish the additional space as you're able.

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