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.

Here’s the quick overview of this project: We made mistakes every step of of the way!

Here’s the longer version:

First, we overpaid for the property. We originally set our maximum purchase price for this house to be around $32-33K. But, given that we didn’t have any other projects going on and didn’t have any other prospects for new projects, we acted a little bit desperate and ultimately paid $40K. My rationale at the time was that if the rest of our assumptions and analysis were correct, we’d still easily make our profit target.

Unfortunately, we missed on our other assumptions as well…

Next, we went over our rehab budget. We knew there was likely to be some structural issues with this property, just based on the amount of water that was getting into the house. We didn’t expect that there would be as much dry-rot and termite damage as there was, but given the visible condition of the house, we probably should have. Ultimately, we went over budget by about 10% (about $6000). This is the first time in 20 houses that we significantly went over budget, and it was a good reminder that no matter how long we’ve been doing this, there will be surprises on occasion.

Next, we over-estimated the resale value of the house. Sure, we looked at the comps. And they supported our initial ARV of about $135K. But, in retrospect, we knew these comps were suspicious. There is an investor in our area who isn’t completely ethical, and he does a lot of weird stuff with his properties, including selling them being his own companies to raise market value and to serve as comps for his own resales. While we knew these comps weren’t on the up-and-up, we ignored the fact that likely meant we wouldn’t be able to resell for amount. And we were correct. Actual ARV was about $10K below our estimate.

Lastly, we under-estimated how long it would take to sell the property. We always assume six months in our financial analysis as a worst-case assumption. In this case, we didn’t factor in the fact that if we didn’t sell before the tax-credit expired in May, we likely weren’t going to be able to sell until the Fall. And that turned out to be correct. While we had two contracts before the tax-credit expired, both fell through and we ultimately weren’t able to sell until now — over nine months after purchasing.

So, in the end, we spent $8K more than we should have on the purchase, went over budget by $6, underestimated resale by $10K and went over our holding costs by about $1K. In other words, our analysis of this project from the beginning was off by $25,000!!!

Now, the good news is that we are always VERY conservative in all of our assumptions, analysis and decisions. And because we were so conservative on this project as well, despite the $25K missteps, we still were able to generate a profit of about $6,300. Not great, and certainly not worth the time and effort we all put into this project, but given that our calculations were off by 20% of the sale price, most investors likely would have lost money on this project.

Just a testament to how important it is to always be conservative in your analysis and to never think that things can’t go wrong — they can!

Okay, so on to our final analysis numbers:

Timelines

As I mentioned above, the total hold time on this house was 274 days…the longest we’ve ever held a house that we weren’t renting or lease/optioning…

Here are the key timeline milestones:

• Purchase Offer Date: 12/8/2009
• Purchase Closing Date: 1/20/2010
• Rehab Completion Date: 3/28/2010
• Sale Listing Date: 3/29/2010
• First Sale Contract Date: 4/3/2010
• Final Sale Contract Date: 9/10/2010
• Sale Closing Date: 10/21/2010

Financials

Here is the breakdown of financials for this project:

Our ROI on this project was about 6% and our annualized ROI was just over 7%.

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: 43 Days
• Rehab Time: 65 Days
• Selling Days on Market: 165 Days
• Selling Close Time: 41 Days
• Total Hold Time (Close to Close): 274 Days
• Total Profit: $6,382.87
• Return on Investment (ROI): 5.85%
• Annualized ROI: 7.79%

We’ve completed all the repairs that were noted in the buyer’s inspection, so we don’t expect any additional rehab costs at this point. The first appraisal was completed last week, and came in just above the contract price, which was great news!

Turns out the lender is requiring a second appraisal on this one (it’s an FHA loan), and the second appraiser visited the property today. We’re hoping to have that appraisal back within the next couple days, at which point we should just be waiting for underwriting to complete (the underwriter told us that the appraisal was the last piece of the puzzle, so we’ll see).

We’re scheduled to close this one at the end of next week…fingers crossed!

The good news is that he still didn’t find much to put in his inspection report (nice to see my guys doing a good job!). Ultimately, he found 13 issues, and most of them were minor and not at all safety issues. Nonetheless, the buyer requested that we fix all the issues, and we plan to do so.

The only non-minor issues are missing hand-rails on two of the stair-cases (how did we miss that!?!?), GFCI protection in the bathrooms (again, we should have caught that) and an electrical short between the circuit box and the electric hot water heater, which could be the result of our contractors connecting the water heater before filling it, and frying the heating element. The rest of the stuff are things like adjusting the flush mechanisms on the toilets, securing the external hose-bibs to the siding, securing the electric meter to the house, and filling in some missing mortar around the stone facade.

The next big hurdle is the appraisal and we’re hoping that gets done this week…

As I mentioned in my last post about this house, we haven’t had much traffic through this property since the tax credit expired in May, and the first two contracts we had on the property fell through because the buyers couldn’t get their financing. Over the past two weeks, traffic has picked up considerably, so I’ve been optimistic that we’d have another contract soon.

The buyer made their original offer on Thursday morning, and we countered on Thursday afternoon. By Friday, all terms were agreed upon, and the contract was official. The final purchase price is very close to full-price (which we had dropped $10K over the past couple months), and the terms are all very reasonable.

The buyer is using a program called the Georgia Dream Program to help them with their downpayment; since we haven’t worked with any buyers using this program before, it should be interesting to see what new challenges it comes with…

The closing is scheduled for October 15, but there are still a number of items that need to be dealt with before we start thinking about that (inspections, appraisals, buyer financing, etc). I’ll have an update in a week or two once the inspection and appraisals are out of the way…

Last I mentioned, we had a second full-price contract on the house with a buyer who was getting funded through NACA. I’m sure I mentioned it at some point (though I can’t find any posts), but because NACA is so backed up these days, the buyer wasn’t able to get her final loan approval before she needed to deal with some other major expenses, and so she had to drop out of the NACA process.

This was a couple months ago, and since then, the market has slowed tremendously in my area. Between the expiration of the tax credit and the flood of short sales hitting the market, there really aren’t too many buyers on the market for this house. While we’ve gotten about a half dozen walk-throughs in the past two months, we haven’t gotten any other offers.

We’ve marketed the property tremendously, and we’ve gotten LOTS of calls from folks driving by the house, but unfortunately none of them have been anywhere near qualified to buy. In fact, my wife has had to stop showing people the property until they talk to a mortgage broker to save her the time and effort of all the wasted showings she has to do; most don’t bother to call back once they find out they need decent credit and a down-payment to buy a house (how the hell do they think buying a house works?!?!).

While I’m not convinced that price is an issue (remember, we’ve already had two full-priced contracts on this one), we decided to lower the price about $10K. We’ve also offered a $1500 bonus to the agent who brings a buyer to us. So, there are incentives all-around for buyers and agents, but we still haven’t gotten much traction.

All that said, it appears things are slowly starting to pick up again, so I’m hopefully that we’ll get some additional showings soon, and hopefully an offer from an interested buyer. Until, we’re just going to sit back and wait…as we’ve tried pretty much everything else…

This offer came from a buyer who is using the NACA loan program that we became familiar with back when we were selling The Hat Trick House. If you recall, NACA is a loan program for low-income borrowers, often with sub-par credit. Buyers go through counseling, and have to provide proof of steady employment and rental payment for the previous two years. In addition, they get loans that require no downpayment, no buyer-paid closing costs, and interest rates as low as .25% (yes, one-quarter percent in some cases!).

While it sounds like a recipe for lending disaster, in reality NACA borrowers default less than 2% of their loans, making it probably the safest loan product in the country. In addition, inspections and appraisals are easy (they’ll loan up to 110% of the appraisal price), and the buyers have already gone through underwriting by the time they get their approval letter, meaning that from offer to close is only a couple weeks. I still find it amazing that there are loan programs like this, but as a seller, I love it, and I love having NACA buyers make offers on our properties.

The only catch with this particular buyer is that she hasn’t yet received her final approval from NACA. She expects it this week, but who knows…

So, we put a stipulation in the contract that basically said that we can continue to show the property, and if we get another offer, we can back out of the contract on 24 hours notice without any penalty. That gives her 24 hours to get her NACA approval, or we are free to work with another buyer. No risk on our end whatsoever…

I’ll let you know when she gets her NACA approval (or if things change), but we’re hoping to close this one by the end of May…

This was an incredibly long and tedious project relatively to some of our others — it took over 9 weeks to complete, we were over budget by about 10%, and in retrospect, we probably paid too much for the house. That said, the results are amazing, and this is probably one of my favorite houses to date. If you look at the before and after pictures of this house, you’ll understand what I mean.

Here are the final pictures, after the rehab was completed and the house was staged:

FINAL STAGING PICTURES

And as a reminder, here are the BEFORE pictures of this house:

BEFORE PICTURES

I think you’ll probably agree it was a tremendous transformation! Now, it’s just a matter of marketing it and getting it sold. I’ll keep you updated…

We spent the weekend finishing up last minute details of the rehab, and getting all the staging furniture to the house. Our handyman spent literally 30 hours over four days at the house doing last minute work, including building a mantle, tiling the entryway, getting the outlets and switches changed out, painting the concrete front porch, adjusting doors, etc. By Sunday morning, the rehab was complete, all the furniture was in the house and placed in the correct rooms, and we were all so tired that we decided to put off the remainder of the decorating (hanging pictures, etc) until Monday.

On Sunday afternoon, my wife got a call from someone who drove by the house asking if she could take a tour of it (we always put a sign in the yard for the duration of the rehab to generate interest). My wife had some more staging stuff to drop off at the house anyway, so she went over to meet the woman and show her around.

It turns out the woman has been looking for a house since late last year. She was qualified for an FHA loan, but couldn’t get anything under contract (all the houses she looked at either didn’t qualify for FHA or she was outbid). That said, she was qualified for a loan less than our asking price, but she was confident that her credit has improved in the past six months and that she could likely qualify for more.

Within a few minutes of walking into the house, she fell in love. She told my wife that it was exactly what she was looking for, and was ready to sign a contract. Obviously, without approval from our mortgage broker, we were hesitant to sign a contract, but the buyer was happy to submit a contract contingent on her ability to get financing, so Monday afternoon, she formally submitted a full-price offer and we accepted.

We expect that we’ll find out within the next day or two whether she qualifies for a mortgage at that price, and assuming she does, we’ll get the ball rolling on getting the house sold. If she doesn’t qualify, we’ll formally start marketing it, and take it from there.

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…