Here’s a quick recap of our accomplishments:

• 24 Houses Purchased & Resold (Every One Profitable!)
• 5 Mobile Homes Purchased and Resold (4 out of 5 Profitable)
• 2 Houses Held as Rentals for Short Periods

Of the 24 houses that we purchased and resold, the level work completed breaks down as follows:

• 18 Full Rehabs
• 2 Minor Rehabs
• 4 Wholesales to Other Investors

In addition to the 29 deals that we did directly, we’ve also started carving out a niche helping a couple other investors with their rehab and resales. My wife has staged nearly a dozen other properties for other investors (including a model apartment for an apartment complex), we have managed several rehabs and we have listed and sold several properties for a couple very select investors.

Some financial statistics of the 24 houses purchased and resold:

• Total Profit on Flips: $478,083.10
• Average Profit Per Flip: $19,920.13
• Minimum Profit: $3,416.21 (House #1)
• Maximum Profit: $40,487.06 (House #16)
• Average ROI: $94.37%
• Average Annualized ROI: 421.80%

Also worth noting is that by having our own real estate licenses, we have saved or earned over $82,400 in commissions over the past 3 years. That about one-sixth of our total profit.

Of course, those numbers don’t take into account the cost of employees (myself, my wife and our project manager) nor the overhead costs of the business. Between the costs of being real estate agents (my wife and I), the cost of equipment, vehicle maintenance, staging furniture, etc, we actually spend a good bit of the profits, though I don’t have the exact percentages. So, don’t assume the numbers above are what we’re taking home — it’s a pretty good business, but not that good!

In terms of our rehabs, here are some interesting statistics:

• Average Purchase Price: $47,541
• Average Rehab Costs: $24,242
• Average Rehab Project Time: 28.5 Days
• Average Sale Price: $101,108
• Average Hold Time: 103.4 Days (not including the two rentals)

One of the places where we’ve been tremendously successful is in marketing and selling our properties in this tough market. While many investors have properties sitting for months on end and/or selling for far below what they expected, so far we’ve been very good at getting properties sold quickly and near our expected sales price:

• Average Time From List to First Contract: 17.9 Days
• Average Time From List to Final Contract: 43.0 Days
• Longest Time Property Took To Sell: 184 Days
• Shortest Time Property Took To Sell: 0 Days (Twice)
• Average Sale as % of List Price: 95.2%

Probably my favorite stat above is the 95.2% of sale price to list price. This means that on average, we sold our houses for over 95% of what we *ORIGINALLY* listed the houses for. Even in rare cases where we had to drop our prices, the average was still tremendously high.

Lastly, it’s nice to know that we’ve had a small little impact on our local economy. In addition to rehabbing 24 properties, which inherently improved the neighborhoods where we buy, we spent a good bit of money doing so:

• Gross House Purchase Costs: $1,141,000
• Gross Sales Revenue: $2,426,600
• Total Spent on Contractors: $465,000
• Total Spent at Home Depot: $117,000

It’s amazing that in three years, we’ve bought and sold over $3.5M in real estate and have spent nearly $600,000 on renovation costs.

For a large rehab, this project was pretty textbook; we completely replaced the exterior (new roof, gutters, siding, trim, soffit, fascia, decks, etc), remediated a good bit of mold, waterproofed the foundation, finished the basement, and did a full cosmetic rehab on the rest of the interior — all in about 7 weeks. Had we not gotten so much rain at the beginning of the project, it likely would have been finished in under 6 weeks, which is pretty amazing for a gut rehab like this.

I don’t think I ever nailed down a specific budget on this one here on the blog (other than saying “between $45-55K”), but we came in right about where I expected after adding a few upgrades (large front and back decks, basement closet, new windows) that I hadn’t planned. In total, we spent just over $53K, with $45K going to labor and $8K going to materials.

As I’ve mentioned before, I’m thrilled with how this house turned out. It’s not surprising that we received a quick full-price offer after we put it on the market, and it’s not surprising that we received another near-full-price offer shortly after the first contract fell through. This second buyer (and agent) was a pleasure to work with, as the entire process went smoothly and stayed on track from beginning to end.

We almost had some appraisal issues down the stretch, but the mortgage broker did her job well, and we closed on schedule. Here are more detailed breakdowns of our final schedules and financial results…

Timelines

The total holding time on this house was 172 days. It would have been exactly 100 days had the original contract gone through, but considering we essentially completed two separate sales, I guess this isn’t too bad (okay, perhaps I’m rationalizing a bit ).

Here are the key timeline milestones:

• Purchase Offer Date: 8/25/2009
• Purchase Closing Date: 9/24/2009
• Rehab Completion Date: 11/18/2009
• Sale Listing Date: 11/23/2009
• First Sale Contract Date: 12/8/2009
• Final Sale Contract Date: 2/15/2010
• Sale Closing Date: 3/15/2010

The final contract closed in exactly 4 weeks, which isn’t too bad given it was an FHA buyer.

Financials

This was a pretty textbook rehab for us in terms of financial forecasts and results. We were right on track with our projected budget, and our sale price was right about where we expected it to be. At the beginning of the project, I was expecting a $30K profit if everything went as planned, and we exceeded that by just a bit.

Here is the breakdown of financials for this project:

There will be a few more small transactions before the numbers are finalized — insurance overpayment refund, final utility bills, etc — but I expect that we’ll be within $100 one way or the other of this final profit amount.

Our ROI on this project was 105% (we invested just under $30K of our own cash in the deal), and our annualized ROI was about 224%. Not bad, even considering our relatively long hold-time.

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: 30 Days
• Rehab Time: 54 Days
• Selling Days on Market: 84 Days
• Selling Close Time: 28 Days
• Total Hold Time (Close to Close): 172 Days
• Total Profit: $31,617.52
• Return on Investment (ROI): 105.83%
• Annualized ROI: 224.59%

Turns out that all three properties that we have under contract to sell had an appraisal yesterday, and two of them were last-minute, meaning we didn’t have much time to prepare and we had to stick around to meet with the appraisers…

We knew the appraisal for the sale of The Neighbor House was going to happen yesterday morning at 9:30am (we scheduled it last week), so my project manager was scheduled to take care of that one. This is pretty much a wholesale deal and the property is practically move-in ready, so there isn’t too much concern about this one not appraising, especially given the comps in this area.

We received a call from the buyer’s mortgage broker for The Poor House the other night. She mentioned that — given it was an FHA sale — we’d need to get a second appraisal. We pretty much expected a second appraisal from the beginning, but when the appraisal wasn’t mentioned earlier, we assumed the underwriter wasn’t requiring it. Turns out they just didn’t catch it until now, so they quickly ordered the second appraisal and told us the appraiser would be in touch.

At 10am yesterday morning, he called an said he’d be at the property at noon. He asked a few questions, finished quickly, and let me that he’d already pulled comps and that he didn’t expect any issues. So, that’s good news.

The less good news is that the mortgage broker mentioned that the underwriter was grumbling about the fact that we’re selling the property so much above our purchase price, so I spent a couple hours putting together a full breakdown of all our costs and analysis of our likely profit. Hopefully when he sees that much of that $100K between purchase and sale price went to rehab and other expenses, it won’t be an issue.

We also got a call from the first appraiser on The Poor House yesterday, who told us that his appraisal was being questioned by the bank, and that he had to revise his list of comps. Luckily, there is a brand new (very good) comp for that house that just showed up last week, so he isn’t expecting any issues with the revision. Looks like this is going to be one of those difficult sales, right up to the closing…

The third appraisal we had yesterday was on The Probate House. The broker mentioned a few days ago that he ordered the appraisal, and the appraiser called us yesterday morning as well. He said he’d be at the house around 11am, right between the other two appraisals. So, my project manager ran up to that house as quickly as he could and met with that appraiser. Long story short, we expect that house to appraise without any issues (it’s priced at least 15% below market), but we’ll also have to get a second appraisal on that one as well, given it’s also FHA.

All-in-all, it appears we had three successful appraisals yesterday, and if that’s the case, it was a very good day…

That said, we almost didn’t get a high-enough appraisal, and it was all my fault. As I mentioned in my article last week about “Controlling Your Deals,” it’s up to me (and you) as sellers to make sure we do everything in our power to ensure that each aspect of a transaction goes smoothly and successfully. Unfortunately, with this appraisal, I didn’t heed my own advice.

We received a call from the appraiser that was coming out to the property last Monday afternoon. But, my wife and I were scheduled to head out of town for a couple days, leaving Monday morning. We knew our project manager could handle the appraisal — meeting with the appraiser, showing him around, providing him relevant info, etc — and we even left him with some documentation to give to the appraiser regarding our costs and list of repairs.

But, in our hurry to get on vacation, I didn’t take the time to put together a list of potential comps for the appraiser to look at, and to use at his discretion. Don’t get me wrong — 99% of appraisers are great at what they do and don’t need us to provide a list of comps, but we’ve found that if we do provide comps, many appraisers will appreciate it and will go out of their way to use them. In addition, sometimes an appraiser may be busy and just miss a good comp, and in this tough market, that can make the difference between an appraisal coming in high enough and it coming in way low.

Turns out that in this case, the appraiser missed a comp that supports the value of our property. Luckily for us, he was very nice, and before turning in the low appraisal, he called the mortgage broker to warn her that it was low. She called the buyer’s agent, who called us, and we quickly got a list of potential comps to the appraiser for him to consider a revision.

Ultimately, it all worked out, but based on my laziness, it almost didn’t. Just another good reminder that — in most cases — we hold the key to our own destiny; if you want to be successful in this business, don’t leave things to chance…

House #1: The Corn House

We found out that the lease/buyers for this house haven’t been paying off their credit card each month like the credit repair company suggested. They likely would have qualified last month if it had not been for that, but now they’re likely still a month or two away, best case.

The contract for this lease-purchase expires this weekend, and we met with the buyers last night. We agreed to extend the contract one final time, until June 30 of this year. That means that if they can get the house closed, they’ll still qualify for the $8000 tax credit as well. If they can’t qualify by June, we’ve informed them that we won’t be extending again (we’ve already extended three times).

So, if this one isn’t sold by June 30, we’ll be taking the $7800 that we’ve collected in escrow money and using it to fix up the house and put it back on the market.

House #13: The Poor House

The buyers had their inspection earlier this week, and only came back with a few requests for minor issues (squirrels in the attic, minor shower leak, mis-wired outlet, etc). We are now just waiting for the appraisal to come back, and assuming everything is okay with that, we expect to get this one closed in the next two to three weeks.

House #14: The Pine House

Wow, this one has been a crazy rehab so far. We completely gutted the exterior, ripping off all the siding, trim, soffit, fascia, gutters, roof, and windows, rear deck, and replaced everything. In the process, we realized that there was some termite damage and wood rot to a couple support joists and that the entire chimney was rotted away. So, we replaced a couple beams and completely ripped off and replaced the chimney.

Once the exterior was finished, we brought in the mold remediation company who gutted the entire exterior, and had to remove about 50% of the sheetrock in the house for remediate the mold. It will take another day or two to finish the mold work, but starting next week, we will be rebuilding the interior.

Based on some surprises we’ve found (the extra structural work, the extra mold remediation, etc) we’re probably about $5K over budget on this one…which is too bad considering our profit was thin to begin with. We won’t know until we put it on the market, but hopefully we’ll be able to sell this one for our projected price, or we may be working on our first break-even project. The worst part about that is that this has been our biggest rehab to date, so it’s taking a lot of time and energy.

House #15: The Neighbor House

The buyers for this property are going through the process of trying to secure their loan. Their first lender couldn’t get the job done, but they’re confident that the second lender will.

Currently, the closing is scheduled for March 17.

House #16: The Probate House

This house has been on the market for nearly two weeks without an offer. We’ve had tremendous interest (as expected, given our pricing it well below market), but the very specific back-yard — it has a waterfall and lots of custom landscaping — and the fact that it’s on a main road have turned off several buyers. My wife has always believed that this house will be perfect for a couple with no kids (since there’s no good back yard play area) or a retired couple, and it’s becoming obvious that she’s absolutely right (as usual!).

We have two agents telling us that they have very interested buyers, but until we see an offer, it doesn’t really mean much.

In the meantime, there was a horrible smell coming from one of the back bedrooms in the house. We had our extermination company investigate, and they found a dead squirrel in the attic. The squirrel was probably in there when we were rehabbing the house, and our contractors probably sealed it in when they were replacing damaged fascia boards around the roof-line.

Poor little squirrel…

There’s plenty more going on with the staging business, the mobile home business, and other ventures we’re pursuing, but I’ll save that for future posts…

We were pretty stringent with our counter-offer, and had expected the buyers to counter again, but ultimately, I guess they didn’t want to lose the house. Our counter-offer was close to full-price (though still providing a good bit of money towards their closing costs), they agreed to use our closing attorney, they agreed to shorter their inspection and appraisal periods, and they agreed to increase their earnest money deposit.

Their inspection is scheduled for later this week, and I expect the appraisal to take place next week. I’ll have more to say once we get through those two milestones…

We countered the second offer that we received last week, and because we weren’t very confident that the buyers would actually be able to close, we were pretty stringent on our counter. We countered close to full price, required them to use our mortgage broker, our closing attorney, close quickly, and put down a lot of earnest money. Not surprisingly, they decided they were no-longer interested in pursuing the offer. Just as well…

Today, we received Offer #3, from a couple who had seen the property about two weeks ago. They are first-time home-buyers, and while they loved the house, they have been struggling to decide if they’re ready to actually go through with a home purchase. Ultimately, their agent got them to put in an offer.

The offer is a bit lower than what we’d accept, they want us to get them a property survey, and they want a good bit in closing costs and a good bit of time for inspections and appraisals. On the good side, they are willing to close in about a month, which we like. Ultimately, we think we could make a reasonable counter-offer that both sides would probably think is fair.

But, before even seeing the offer, we spoke with an agent who showed the property to a buyer yesterday. This is the agent who represented the buyer for House #12, so we’ve worked with her before. Her buyer is all-cash (he received a lump sum from somewhere recently), and he indicated to his agent yesterday that he really loved our house, but didn’t give her a final answer on whether he was interested in making an offer.

If he does make a reasonable offer, we’d be thrilled. Because he is a cash buyer, we wouldn’t have to jump through the typical financing hoops, and he probably ask for much in closing cost assistance. He’d also likely be able to close a bit more quickly than a typical financed buyer. We expect to hear today whether he plans to put in an offer or not.

We have until tomorrow night to respond to Offer #3, so we’ll hold off until we find out if we’re getting Offer #4. I’ll have more of an update in the next couple days…

We were originally told we’d be getting an offer about two weeks ago, but due to some family issues, the buyer was out of town for much of the past two weeks. Then, we were told we’d be getting an offer this past weekend, but because of “some issues” with the mortgage broker, it got put off again. This is actually pretty common — we get a phone call from an agent saying that an offer is pending, but then it never comes. My guess is that the buyers either get cold feet or they realize that they’re not really financially qualified to make the purchase.

Anyway, we had given up on actually getting this offer, but this morning it was sitting on the fax machine. The purchase price was low, but something we could negotiate with. More concerning were the other details of the offer — the buyer needs a large portion of the closing costs paid, wants six weeks to close, wants a long due diligence period, etc.

After doing this for nearly two years now, we know these sorts of things to be serious red flags. In fact, if I had to guess, given the current offer, we’d never make it to the closing table, even if we did accept it. There would be issues with the mortgage, issues with the inspections, issues with the closing, etc.

So, our counter-offer is probably going to sound harsh to the buyer, but it’s what we would need to agree to this contract. Specifically, we would require that we use our closing attorney to close the deal, we would require the buyer to put down a very large deposit UNLESS he used our mortgage broker (in which case, he could get away with a much smaller deposit), and we would only allow three weeks to close the transaction. The purpose of the short closing time is that we don’t want to take the property off the market for six weeks just to see the deal fall through, and realize that we just lost six weeks that we could have found a good buyer.

I have a feeling the short close time will be a sticking point. Most mortgage brokers tell their clients that it’s impossible to close in less than 4 weeks, but in our experience, that’s just an excuse for the broker to be lazy and take his time. Realistically, an FHA loan should be able to close in 3 weeks, and a good broker can get it done in less time. So, if the buyer says his broker can’t do that, we’ll suggest he use ours instead. If he refuses to use our broker, and his broker can’t commit to a quick closing, we’d rather not do the deal anyway.

I’m giving this offer about 25% chance of actually getting to an agreed upon contract…I’ll let you know tomorrow…

House #1: The Corn House

According to the credit repair company we have them set up with, the lease-purchase tenants may be close to qualifying for an FHA loan. I don’t know if that’s actually the case, but we plan to have them check in with our mortgage broker first thing next week, and have their credit reports and FICO scores pulled.

Would love to get the house sold to them in the next couple months…

House #12: The Mini House

We have every reason to believe this one should close next Friday. The buyer finished her inspection, and has requested a few minor repairs. Her mortgage broker has told us that she is already through underwriting, and that they are just waiting for the appraisal on the house. While I would normally be a little nervous about the appraisal, the broker has informed us that they service all loans in-house, and therefore have their own appraisers. So, we don’t have to worry about any weird HVCC rules or weird FHA guidelines that could skew the appraisal in the wrong direction.

After four contracts on this one, I’m ready to get this thing closed, and I’m cautiously optimistic it will happen next week…

House #13: The Poor House

We’ve been told by an agent who took buyers to this property last week that we should be getting an offer. Apparently, the buyers’ had a death in the family a day or two after viewing the property, and have been out of town since. Also apparently (who really knows), they have called their agent a couple times to let her know they are very interested in submitting an offer when they return.

Well, they’re supposed to be back today, so we’ll see if we get an offer this weekend. If not, we’ll start doing some heavy marketing next week…

House #14: The Pine House

We replaced the roof on this one already, and would love to start some serious rehab (this will be a huge project), but because we weren’t positive we’d ever own it, we waited until we closed on the purchase before we ordered all the new windows for the house. Because we need the windows before we can replace all the siding, and because we need the new siding before we can do the mold remediation, and because we need the mold remediated before we can do anything else on the interior, we really have no choice but to put off the bulk of rehab until the windows come in.

Hopefully next week…

House #15: The Neighbor House

It doesn’t look like we have much traction trying to wholesale this property (though we haven’t really tried other than posting here on the blog and sending a couple emails to investors we know), and are still trying to figure out the best strategy to pursue here. Right now I’m leaning towards doing a rehab, waiting 90 days to sell, and making a nice profit. While I’d still consider wholesaling for a quick return, waiting a couple months doesn’t seem like a bad option given how easy this one will be to fix up and sell, and how much more we’ll make by rehabbing then we would be wholesaling.

I’ll make a final decision next week on what to do with this one…

House #16: The Probate House

As I mentioned yesterday, we’re in the middle of some reasonable renovations on this house, though we won’t be doing a full remodel. The bulk of the work has been on the exterior, and with all the rain we’ve received the past couple weeks, things have gone a bit more slowly than I was hoping. That said, I expect this one to be completed early next week, and we’ll start marketing it.

My wife wants to initially list it considerably higher than I want to, mostly because I feel like we should under-price it given that we didn’t do a full remodel. But, my wife is likely correct that even at her higher price, the new owner will be getting a great deal given the location and the size of the house. She’s usually right about most things, so I’ll probably relent (or just try to get her down a bit).

My goal on this one is a quick sale…the house is about 30 minutes from where we (or our project manager) lives, so going back and forth won’t be fun for very long…

Staging

Because my wife does most of her staging on contingency (meaning she only gets paid if the property sells while staged), we’re always happy when a staging project gets sold.

The investor who owns the Staging #2 project has indicated that he has gotten a lot of good feedback on the property and is currently negotiating a contract. Given the numbers he mentioned to me, I’m not sure if he and the buyer will be able to come together on price, but we’d love for him to make a relatively quick sale on this property.

The same investor owns the Staging #3 project, and I’m thrilled to say that that one is currently under contract and scheduled to close in two weeks. Not only will getting paid on this job be nice, but it will be nice to get the staging furniture back to use on another project.

Mobile Homes

I’ll have more to say in a future post, but there is a good bit going on with the mobile home business.

The buyers for MH #1 didn’t pay January rent, so we may have to start repossession (they still have a couple days before we kick them out).

The buyers for MH #2 and MH #3 are still paying on time.

The buyer for MH #4 bounced his down-payment check, and quietly agreed to leave. Looks like we’re going to turn around and sell this one for cash for a quick profit.

We have MH #5 purchased…more on that next week.

That’s it…have a great weekend!

After telling his agent that he would meet with her to discuss getting the purchase back on track, the buyer again stopped returning her phone calls. As somewhat of a friend to the buyer, she even went to his house to talk to him, but he wouldn’t let her in.

Ultimately, at this point, the deal is dead, and we’ll be putting the house back on the market…

But, that’s not the end of the story!

Apparently, the buyer’s agent is so angry about the fact that her buyer refused to go through with the deal at the last minute, she is planning to sue him for her share of the commission (about $5000). For those who aren’t familiar with real estate law, the Purchase & Sale agreement provides for the agents to go after their commission if the buyer doesn’t act in good faith when trying to close the transaction.

I’m fairly certain that her main goal is to scare the buyer into actually closing on the property, but I’m also fairly certain that she’ll be happy to follow-through on the suit if she has to. In fact, the agent is so adamant about getting the buyer to live up to his agreement that she has convinced my wife (and me as well) that we should be suing the buyer as well, for both my wife’s half of the commission (about $4000) and our lost income due to the sale not going through.

We’ve probably had about two dozen or more contracts fall through in the past 18 months, but this is the first time I’ve ever really been so pissed at the buyer that I’m willing to go through with a lawsuit. Generally, contracts fall through because the buyer isn’t in a financial position to go through with the deal or because some outside circumstances affect the transaction. In this case, the buyer just changed his mind at the last minute, and won’t even return phone calls to discuss the situation.

In addition, we’ve already moved all the staging furniture out of the property (to Staging Project #3), so now we have to go purchase an entire set of new furniture and re-stage the property — a process that will likely take another two days or our time and effort. This just adds to my anger and frustration.

I’m not sure that we actually will go through with a lawsuit, but my wife spoke with her broker today who said that she believes we have a good case, and that the broker would support our speaking with the attorney the brokerage is affiliated with. So, my wife plans to speak with the attorney tomorrow, and we’ll go from there.

I’ll let you know what happens…