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.

The Negotiation
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.

The Numbers
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.

Funding.
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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  2 Responses to “Offer Accepted on Bathroom Hole House”

  1. $7,000 for flooring and closing costs? That seems a bit low to me. If I recall, my closing costs were usually in the $5,000 range. I’m assuming this is closing costs to buy? Usually the seller pays those, but I’ve never bought a bank-owned property, so maybe they don’t do that. How are you planning on selling the property? Did you figure in the Realtor commission, if you go that route? Did you figure closing costs for the sale of the property?

    I want to see pictures of the pool with a tree in it 🙂

    • My closing costs are around $2,500 when I buy bank-owned – the seller pays the agent commission. I have to pay appraisal ($450), attorney fee ($450), 1% origination ($700), insurance ($600), and prorated taxes with only a month left ($150), and a few other small things.
      BY flooring I mean carpet, linoleum, laminate, etc.

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