My offer has been accepted on the Bathroom Hole house. Initially, I was not able to get into the house. A small bathroom window was open and I tried to climb in and I barely fit into the window. When I got half way in I saw a hole in the bathroom floor – right under the window. The hole was about 3’ X 1‘ and I would have fallen in if I climbed in. I have never been inside this house.
I conservatively estimate that this house will sell for $100,000 which I explained in a previous post. I will be getting it for $32,000. I do not have a detailed repair estimate, and I have not even been inside the house.
I originally offered $23,500 as detailed in my original post. My agent had to enter the offer into a web site and there she found that there was another offer for $33,000 with no response.
I increased my offer to $30,000, but it would be cash, close in two weeks, 10% earnest money, and waive the inspection period. I was hoping this sure-deal would carry more weight that the $33k offer – or at least get a highest and best request.
The seller countered the next morning with $39k.
I moved up to $32,000 and increased the earnest money to 20%.
They accepted this offer. My agent said they had emailed her a counter (not sure how much), then a follow up email canceled the counter and accepted my offer. However, they want a flat $1,000 for earnest because they cannot change it in their system.
I do not have a detialed repair estimate. I have $33k to work with. Here is how I roughly estiamated repairs.
This house has a nasty in-ground swimming pool with small trees growing in it. I do not know anything about pools and have no idea what it will cost to fix it. A local pool company told me that I should be able to fill it in for under $5,000. I think I can do it for less, but I am using that for my estimate. I will eventually get a formal estimate for repairing it and decide if I want to keep it.
It has 2 AC units and one is missing. That will cost about $3,500. Also, the house has 2 electric meters but is not a duplex. I have budgeted $2,500 for converting it to one meter, but I will need to get inside before knowing what needs to be done.
The house is on a huge overgrown lot. There will be a lot of landscaping to do. This involves removing some small trees and filling in some erosion areas. I have budgeted $1,500 for this.
So far, I am at $12,500 for the known outside work. The house is just under 3,100 sq/ft and I assume it will need flooring (carpet, laminate, linoleum) and painting. I have budgeted $7,000 for these tasks and closing costs.
These numbers take me to a $19,500 rehab budget – $51,500 total. I want to be in the house under $65,000 so I have $13,500 to cover the unknowns since I have not been inside.
I will provide pictures and a detailed repair estimate as soon as I get into the house.
On this house I have a verbal approval for an 80% loan from a local bank. They approved me on another house and the deal fell through but I assume I can still the same deal. I am budgeting $20k for my part on this house, which includes the carrying costs.
The other house (the EON House) has been waiting to close for 4 months. I am buying it for $32k and the repairs are about $22k. I should be in is around $60k after closing/carrying costs are added. I think this house will sell for $80k – a smaller margin than I would have liked but I was buying as a rental when I signed the contract. For this house, I have a 75% loan at a local credit union. I will need to come up with about $14k plus carrying costs – I have budgeted $20k.
This puts me out $40k of my own money (doubling my money). I have about $57,000 in a special account for my investing activities. This money was generated from my rentals as either rent or by borrowing more than I needed. However, I have a stack of unopened property tax bills that will probably cost me about $10k. In addition, I have a $29k equity line against my primary residence just in case I need it.
I hope to make about $40k on these two houses in six months. I would prefer to use 100% borrowed money but I have not lined up this type of financing. There is no prepayment penalty for my two loans, but I know they do not like to loan to flippers. After I sale, they may not loan me anymore money.
I will continue to pursue leads and make offers. If I get a deal I will worry about financing then – or try to wholesale the house.
Feel free to comment on my approach. You can critique my method or ask questions.
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