This one is a Fannie Mae property that has a 90 day deed restriction — which means we are legally forbidden from reselling it within the first 90 days of ownership for more than 20% above what we purchased it for. In other words, if we purchase it for $50,000, we have two choices:

1. Sell it for less than $60,000 in the first 90 days; or
2. Wait more than 90 days and sell it for whatever we want.

This means that we can either try to wholesale it (sell it to another investor) quickly for a small profit or rehab it and have to wait three months to sell it. If we decide to wait the 90 days to sell it, we can actually sell on day 91, so we can still spend the 90 days rehabbing, finding a buyer and getting their financing lined up.

Since we don’t know if this would be an attractive wholesale deal or not, what we’ll likely do is the following:

1. First, we’ll do a very minor rehab — clean the carpets, paint touch-up, ensure the utilities work, etc — and get it into rental condition. We’ll relist it, trying to wholesale to a landlord for a small — but quick — profit. The actual purchase price is $53,000, so the maximum resale amount in the first 90 days is $63,600 (20% above purchase price).
2. If, after a month or so, we haven’t sold it, we’ll do a more substantial rehab and start marketing it to retail buyers.

I’m calling this one The Easy House, as the rehab on this one will be about as minor as we’ve ever done. The retail comps for this house will be pretty low, so even if we decide to get this one into retail shape to sell to an owner occupant, the rehab will likely be less than $10,000 — the smallest rehab we’ve ever done for a retail sale.

Here are my estimates for this project:

We’ve already gotten a few of the bids on the project, so I expect that it shouldn’t be too difficult to hit these estimates. The only major surprise I’d be concerned about is the HVAC system…it looks okay, but until we get the gas on and have our HVAC company out to test it, there’s no way to know.

I’ll post some pictures later in the week…

This one is going to be called The Ticket House, given that I got a speeding ticket while entering the subdivision the first time I went to the house. As anyone who knows me will tell you, I’m pretty stubborn, and if I’m going to get a ticket, I’m at least going to buy the house and make enough to pay for the ticket!

This house is actually a little bit different for us. Not only is it about 30 minutes outside the area where we normally invest, it’s also a bit higher price point. We’re purchasing this one for $80,000, will likely put between $20-25K into renovations and will resell in the $130-150K range. It won’t be a difficult project, but given that we don’t know the area very well — and we don’t know the buyers agents who work in the area — it will present some new marketing/selling challenges.

But, we’re looking to branch out our investing area this year, so this will be a good start for us…

I’ll post our rehab budget and some pictures in upcoming posts; hopefully we’ll have this one purchased and ready to start renovations in the next week or two.

But, we do have a few pictures that are unique to this house (especially the interior, exterior and main living spaces), and here they are:

THE FULL HOUSE: STAGING PICS

Hopefully we’ll have this one under contract in the next few days…

This closing snuck up on us — we weren’t supposed to close until the end of next week, but the lender, agent and buyer were all pushing to get it done this week, so we figured out how to make it happen while we were away. Ultimately, this may have been the smoothest closing process we’ve ever had, but perhaps that’s just because we really didn’t have to do anything up until the final 24 hours.

Anyway, here is the full final analysis for this one…

Timelines

Here are the key timeline milestones:

• Purchase Offer Date: 9/19/2011
• Purchase Closing Date: 10/12/2011
• Rehab Completion Date: 10/27/2011
• Sale Listing Date: 10/28/2011
• First Sale Contract Date: 11/19/2011
• Final Sale Contract Date: 11/19/2011
• Sale Closing Date: 12/22/2011

Financials

Here is the breakdown of financials for this project:

Our profit on this one was nearly $23K. We were pleasantly surprised that the appraisal came in at the sale price ($103K), given that there hasn’t been much retail activity in the area, other than our recent sale of The Drought House, which sold for $5K less.

Final Statistics

Here are just some of the final statistics that I’ve been tracking for all my projects, and that summarize the success/failure of each project pretty well:

• From Offer to Purchase Time: 23 Days
• Rehab Time: 14 Days
• Selling Days on Market: 22 Days
• Selling Close Time: 33 Days
• Total Hold Time (Close to Close): 71 Days
• Total Profit: $22,974.14
• Return on Investment (ROI): 32.27%
• Annualized ROI: 165.90%

I should say that we FINALLY closed on this sale. We were scheduled to close about a month ago, when the lender went of of business the day before closing. It was supposed to take up to 2 weeks to get a new lender in place and get to the closing table, but that timeline continued to stretch out day by day for another two weeks. Unfortunately, the lack of communication by the loan officer and her company made this an absolutely horrible experience, and we’ll never work with her again.

Anyway, it finally all worked out…here is the full final analysis for this one…

Timelines

Here are the key timeline milestones:

• Purchase Offer Date: 8/7/2011
• Purchase Closing Date: 9/14/2011
• Rehab Completion Date: 9/29/2011
• Sale Listing Date: 9/30/2011
• First Sale Contract Date: 10/2/2011
• Final Sale Contract Date: 12/2/2011
• Sale Closing Date: 12/13/2011

Financials

Here is the breakdown of financials for this project:

Our profit on this one was a bit over $21K. We were pleasantly surprised that the appraisal came in at the sale price ($110K), especially given that our past two sales in that neighborhood only appraised for $105K. Our annualized ROI was decreased significantly due to the extra 30 days it took to close (this added 50% to the total timeline).

Final Statistics

Here are just some of the final statistics that I’ve been tracking for all my projects, and that summarize the success/failure of each project pretty well:

• From Offer to Purchase Time: 38 Days
• Rehab Time: 13 Days
• Selling Days on Market: 2 Days
• Selling Close Time: 72 Days
• Total Hold Time (Close to Close): 90 Days
• Total Profit: $21,366.34
• Return on Investment (ROI): 26.94%
• Annualized ROI: 109.24%

The problem was that there were two mortgages on the property, and the first and second mortgage holders couldn’t come to terms on how much the first mortgage holder was going to allow the second mortgage holder to make on the deal. They were literally fighting over $117, and neither wanted to budge. Ultimately, the second mortgage holder realized that if they didn’t agree to the deal (and $117 less than they wanted), they would have walked away with absolutely nothing — that was enough to convince them to approve the deal.

So, at about 1:15pm yesterday (15 minutes before the deadline that the first mortgage holder gave us), we got the paperwork signed and the funds wired to the banks. Anyway, the house is now ours and rehab will begin in a few days.

We’re hoping to keep the rehab to about $15K — including a major (but not full) cosmetic renovation. Unfortunately, I didn’t get pictures yet, so those may have to wait a bit…

We first offered on this property back in the beginning of October, and have been waiting for both the first and second mortgage holders to approve the deal. The first mortgage holder did so quickly, but the second mortgage holder kept demanding more and more money out of the deal. Ultimately, the seller was able to come up with some cash to satisfy the second mortgage holder, and the deal was approved last night.

The first mortgage holder said that we needed to close today, apparently not understanding that we needed time to pull title. They finally agreed to extend the closing to early Monday afternoon, and our awesome closing attorneys agreed to work their butts off to make it happen.

The final detail was that I had a private lender set up to fund this deal, and we had spent the last couple weeks hammering out terms and a contract. Then, late last night, he calls me and asks for me to pay about triple what we had discussed, claiming that he didn’t understand the terms of the deal (we had discussed x% interest rate and he said he thought that mean x number of points — nearly tripling the cost of the deal for me).

Personally, I think he was just looking to renegotiate and get more money of the deal at the last minute, but I’d rather just pay cash for the property than to have to deal with someone so unethical (a good lesson about why contracts should be solidified sooner rather than later). I’ll have a lot more to say about the whole situation in a future post.

Anyway, we’re scheduled to close Monday morning, the rehab should be quick and painless, and we expect to have this one back on the market as soon as we return from vacation before the new year. I’ll post pictures and my rehab budget in an upcoming post.

House #26: The Fourfecta House

As I mentioned a couple weeks ago, the lender for The Fourfecta House went out of business the day before we were to close on the house. As we hoped, the entire loan team (including underwriters) was able to move over to a new direct lending company, and has been working to get approval to work with the downpayment assistance program the buyer is using for part of his financing.

We were originally told that we should be able to close by the end of November (today), which obviously didn’t happen. We’re now being told that we should be able to close by the end of next week. Considering we’re leaving for vacation at the beginning of next week, it doesn’t leave us much of a window, but we’re hoping to close before we leave.

House #27: The Waffle House

The buyers for The Waffle House completed their inspections over the weekend, and sent us their list of requested repairs. Luckily, the list is short and the repairs are minor — replacing a few window screens, fixing a loose hinge on the fence gate, fixing the weatherstripping on the garage door, supplying a fireplace grate, and fixing reversed hot/cold water lines on two of the faucets.

The lender ordered the first appraisal today, and hopefully that will take place before we leave for our trip next week. Currently, we’re still on track to close before the end of the year.

Offers & Contracts

We’ve made lots of offers over the past month or two, and have actually gotten several properties under contract, but nothing that’s panned out. Here is a quick run-down:

• I mentioned the potential House #28 a couple weeks ago. Ultimately, the bank agreed to a $3000 price reduction and a short due diligence period. During that due diligence period, we found several issues with both the foundation and the house’s brick facade that would have increased the renovation costs by a good bit more than that $3000 reduction. So, we choose to terminate the contract
• We received word from HUD that a property we had bid on several weeks ago had come available again and that they had awarded us the contract based on our old bid. We had two days to submit the finalized contract if we were interested in the property. During that two days, we discovered that the county tax records were incorrect in their flood zone classification for the property, and that the house was in a 100 year flood plain. While we were trying to decide if we still wanted to go through with the deal, we received another email from HUD telling us that they had made a mistake, and that we hadn’t actually gotten the property.
• We’ve been working on a short sale deal for about two months now. The house is scheduled to go to the foreclosure auction next Tuesday, so that was the deadline for getting the deal done. The first mortgage holder approved the deal about 6 weeks ago, but the second mortgage holder has been holding out for more money. They apparently decided today that getting a little bit of money through the short sale was better than getting nothing through the foreclosure, and it sounds like they’re going to sign off on the deal tomorrow. Hopefully they will…and hopefully we can get title pulled and closing scheduled before the foreclosure.
• We currently have about a half-dozen other offers in on properties, waiting for responses from various sellers. Hopefully we’ll get at least one or two of these, as things are pretty slow around here these days and we’re looking forward to our next projects.

We’ve worked with the selling agent before, and we’re thrilled to be working with her again. She represented the buyer for The Corn House earlier this year, and that transaction went about as smoothly as we could have hoped. It’s not too often we find truly competent and hard-working agents in our business, but when we do, it’s a pleasure to get to work with them over and over.

There’s not too much to say at this point — I imagine inspections and appraisals will be scheduled over the next couple weeks, and the plan is to close just before the new year. This buyer is working with a local downpayment assistance program, so there will be some extra steps in the inspection, appraisal and underwriting process, but I don’t expect any issues, and will post an update as the sale progresses.