Investor Cashes in on 'Cheap, Shabby' Homes

"We'd been hoping and praying that we could buy something," said Chitwood. "We're not young anymore. So you don't get a lot of chances. Saw the sign 'For Sale' … 300 dollars down, 275 per month … I backed up, said to my husband, 'That's too good to be true.'"

Haning bought the house from Barnes for about $5,000 and sold it to the Chitwoods, with no improvements, for $27,000. At 12 percent interest for 15 years, they'll pay almost $50,000.

Despite the higher-than-normal interest rates, Chitwood was happy with her decision. "I just wanted a house, and once my son said, 'Mom, this house is well built,' I bought it," she said.

'People Want to Own a Home'

Chris Estes, executive director of the North Carolina Housing Coalition, thinks these types of transactions can be problematic. "Sure, families are always happy when they first get in the house that they own at any level, whether you buy it at $9,000 or at $300,000. The challenge is, how do those families feel about that purchase two years from now, three years from now? Are they still able to afford their mortgage?"

As many as 30 percent of Barnes' buyers wind up losing their homes, can't keep up with the payments or can't handle the repairs.

Estes said some people are better off renting. "Is it better for them to be in a better-utility rental unit that doesn't cause health issues, doesn't have issues with mold or asbestos or lead paint, rather than owning a home that may have some of those health issues?"

"The model of helping low-income people buy homes is a great idea. It's really how you do it and what the impact is," he continued.

"People want to own a home," said Barnes. "And these people -- they're poor, they ain't dumb. They know how to put in a hot-water heater. If their house needs to be painted, they'll go to Lowe's to buy a gallon of paint and they'll paint it. They don't have book sense, but they know how to fix up their house. And it's amazing -- you go to them and they fix them up and they're so proud and they own a home."

And it's those two fundamental American tenets -- home ownership and capitalism -- that have made Odell Barnes a wealthy man.

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