I am calling this the eon house, because it seems to be taking that long to close.
This is first house I will be buying since starting my new strategies. I had originally made the offer with the intention of this being a rental. However, I have now decided to attempt a flip for the first time.
The eon house is a 2,171 sq/ft houses in a decent neighborhood. This is a split level house that has 4 bedrooms and two bathrooms. It was a bank owned property and the tax assessed value is $102,000. The tax records show that it has a pool but that has been filled in. This house should rent for $950, and I have another smaller house down the street that rents for $900. I would not want to spend more than $55,000 on this house as a rental (about my goal of 60 times rent).
I now intend to flip the house so my buying strategy is a little different. I estimate that the ARV (After Repair Value) is $80,000. Since the bank is already involved I have an appraisal that gives this amount. I think this number is conservative and I may be able to sell it for more than this. My goal is to purchase at 70% of value, minus the repairs and closing costs. This means I would not want to spend more than $56,000 total.
I estimate the repairs to be $21,000 and it will cost about $2,500 to close. I have a contract to purchase for $33,250 which means I will spend about $56,740 – just a bit over my target for a flip.
I have a loan approved at a local credit union. They will loan 75% of what I spend on the house. This is a 10 year balloon at 7.5% with a 15 year amortization. However, it is initially an interest only construction loan while I renovate (and I can usually wait a few months to roll it to perm). Assuming it take 6 months from purchase to sale I will pay about $2,000 and another $1,800 in utilities. I am budgeting $4,000 for carrying costs.
When I originally found this house it needed about $13,000 in work. This includes painting, carpeting, plumbing repair, patching drywall, and some additional carpentry work. The max I would pay for the house was $40,000. At this number, my total would be about $55k after repairs and closing costs.
May 31 – The house was listed for $47,900 and I offered a $30,000 cash offer on May 31th.
Jun 2 – The seller countered with $44,547, and lowered the listing price to that amount.
Jun 2 – I raised my offer to $31,200.
Jun 6 – The seller countered at $43,000.
Jun 6 – I moved up to $33,000.
Jun 8 – The seller said they were tired of dealing with me and wanted my highest and best offer.
Jun 8 – I gave $38,200.
Jun 14 – The seller responded with $42,500 (I thought they were tired of this?).
Jun 14 – I moved up to $39,000.
Jun 20 – They accepted my offer of $39,000.
This was just the beginning of my problems.
I signed the contract on June 23. By now I had financing lined up. I like to offer cash but then finance it if I can arrange it by the closing date. The cash is a back up – the deal is not contingent on a loan. When I needed to change the paper work to include the loan the seller got upset, but they eventually agreed.
One July 4th I was off work and decided to go by the property. This house had two AC units, and now one was missing and the lines for the other were cut. I called my agent and he said the listing agent would check it the next day. The next day, there were zero AC units. Two units had been stolen.
I informed my agent that I would be pulling out of the deal. I wanted the seller to replace the units or reduced the price. I will cost me about $6,500 to replace both units. I asked for a new price of $32,000, the original price minus the AC cost, and a little extra. Eventually, on Aug 9 (a month later), the seller agreed to drop the price by $5,750. Replacing the units will cost more than this – but then I will have new units and used ones were stolen.
After agreeing on the price I had to wait for the seller’s attorney to complete title work. They required that it be done by their attorney and not mine (who can do it in 4 days). I had to sign several 7 day extensions, then on Sep 1st, I was informed that the seller was refusing to sign an extension because I could not close. On top of that, they wanted to keep my earnest money. Eventually, the asset manager was replaced and the new manager agreed to proceed with the deal on Sep. 9th. Since that date I have been waiting for the title work and signing extensions. It has been two months and they say they will still close.
I am still waiting to close. They have my $1,000 earnest money and claim that they will close. It was supposed to close this week but that looks doubtful.
When (or if) I close I will post pictures and a detailed repair estimate.