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.

Not only was this was quite an interesting project all-around, but it was the most profit we’ve made on any rehab to date (see financial breakdown below). While we originally found this property back in October (actually, we didn’t find it, our awesome closing attorneys — and our good friends — did), we purchased this property in mid-January. We decided not to do a full rehab on this one for several reasons. First, we didn’t know the area very well, so we didn’t want to take a chance of over-rehabbing it or trying to compete with other retail listings that we weren’t familiar with. Second, it has some very custom features — including tens of thousands of dollars worth of backyard landscaping — and we weren’t positive which features our likely buyers would want to keep.

So, we decided to do all the basics — we remediated the existing mold, fixed some structural/framing issues, did some major waterproofing of the exterior, repaired the roof, replace a lot of bad siding, did some basic landscaping, painted the interior and exterior, replaced a number of light fixtures, and replaced much of the flooring. We had expected to spend about $35K on the rehab, but ultimately we were able to get the cost down to about $21K, as our existing contractors owed us some favors and some new contractors were looking to build a relationship with us.

We finished the rehab about 3 weeks after we took possession of the property, and had it under contract about 3 weeks after that. Because we had only held the property for 6 weeks and because the buyer was getting an FHA loan, this was our opportunity to test out the new FHA rules around having to hold the property for 90 days before selling. Ultimately, it was a crazy process — we had to have multiple appraisals, multiple inspections, provide all our rehab expenses (including invoices) to the underwriter, and just plain undergo a lot of scrutiny to get this deal closed.

The nice thing was that the buyer is a General Contractor (he owns a basement refinishing company), so he was perfectly comfortable with the areas of the house we hadn’t rehabbed (outdated kitchen, outdated baths, old windows, and lots of landscaping work). He didn’t ask for any repairs based on his inspection, and working with a buyer who knows construction made the whole process easy, as he recognized that the work we did was high quality and the work we didn’t do was mostly cosmetic.

Here are more detailed breakdowns of our final schedules and financial results for this wholesale project…

Timelines

The total hold time on this house was 80 days. I’m thrilled that we now have a broker/lender that can get FHA loans done prior to 90 days, and we’ll certainly use him again on future deals.

Here are the key timeline milestones:

• Purchase Offer Date: 1/10/2010
• Purchase Closing Date: 1/15/2010
• Rehab Completion Date: 2/7/2010
• Sale Listing Date: 2/8/2010
• First Sale Contract Date: 2/27/2010
• Final Sale Contract Date: 2/27/2010
• Sale Closing Date: 4/5/2010

Financials

This property was located in a much nicer area of town than most of our rehabs. We purchased the house through a probate sale (again, thanks to our awesome friends/attorneys) for $70K, put in about $21K in rehab, and sold for about $145K. Average comps in this neighborhood were in the upper-$100K range, so we sold for well below market, which was a win/win for both us and our buyer.

Here is the breakdown of financials for this project:

Our ROI on this project was about 44% and our annualized ROI was just over 200%.

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: 5 Days
• Rehab Time: 20 Days
• Selling Days on Market: 19 Days
• Selling Close Time: 37 Days
• Total Hold Time (Close to Close): 80 Days
• Total Profit: $40,869.65
• Return on Investment (ROI): 43.87%
• Annualized ROI: 200.17%

Late last week, we were told that we needed to get an FHA “Flip Inspection” from a qualified FHA field inspector and also that we’d need to provide all our of contractor invoices for the work that was done. Both of these requests seem a little weird. The inspection is weird because the underwriter has already seen a full inspection report from the buyer’s inspector and has already seen clean reports from two separate FHA certified appraisers. The invoices request was weird because they claimed it was to verify that we (the seller) did all the work on the house, and not the buyer; while that’s what they said, I am assuming they just want to verify that we actually did the work we said we did.

Anyway, the FHA inspector came to the house on Saturday morning. Before he got there, we had our handyman fix a few minor issues that we were concerned might get the attention of the inspector, including putting covers on a few electrical junction boxes, adding a drip line to the hot water heater, fixing an exterior door that was difficult to close, and covering up any evidence (like ceiling stains) of a roof leak that we had repaired last week.

The inspector spent about 2 hours at the house. He explained that he was doing a “flip inspection,” which I had never heard of, but from the name, I assume it was FHA’s way of ensuring that we weren’t shady investors looking to make a quick buck. In fact, he spent the first fifteen minutes grilling me personally on the work we did to the house; he was mostly concerned about the waterproofing work and mold remediation. It seemed like once he was confident that we actually did the work we said, and that once he was convinced that we actually did quality work, he basically decided to make the whole inspection process easy.

He pointed out a few things that needed to be corrected to pass FHA compliance, I agreed to have all the work done ASAP (which we will), and he indicated that he was satisfied. I hope that his report doesn’t indicate any issues and that we can actually overcome this little hurdle.

As for the invoices, I’m generally really good about getting contracts and invoices from all my contractors, but for some reason, there were a few jobs that I just didn’t collect any paperwork. Specifically, I never got a final invoice from my landscaper, and I never got invoices for the work we did after the buyer’s inspection (roof repair, electrical repair, rodent extermination). So, I’ll be scrambling first thing Monday morning to get those documents and get them to the underwriter.

We’re scheduled to close on Friday…who knows if that will happen or not, but my fingers are crossed…

Well, a lot can change in a few hours…

This afternoon, the mortgage broker for the buyer called, and he wasn’t happy. Apparently, the underwriter for the loan had informed him that they would need to get a certified FHA inspector to inspect the property before they could clear the loan. It wasn’t good enough that the buyer had a full inspection (that’s been sitting on the underwriter’s desk for two weeks) and that two certified FHA appraisers gave thumbs-up on the property…they need a formal FHA inspection as well.

The crazy thing is, there are only 3 certified FHA inspectors in our entire county — and there are over two-thirds of a million people in our county! So, it could be several days before an inspector can get to the property, and after he does, who knows what he’ll ask us to fix. The worst part is that the buyer needs to pay for another inspection, and we’ll have to pay for any repairs that are required.

We didn’t do a full remodel on this house (which is why it appraised for $20K above our asking price), so I wouldn’t be surprised if there are a couple issues that a picky FHA inspector finds. Hopefully nothing major, but who knows.

For reference, this is all in response to the fact that we’re trying to take advantage of the new FHA rules that say buyers can get a loan less than 90 days after the seller acquired the property. Apparently, while the underwriter is willing to abide by the new rules, he is putting the house under lots of extra scrutiny because our sale price is 100% above our purchase price.

Who knows if the underwriter is really just doing his job and being cautious, or whether he is looking for a reason to kill this loan…I guess we’ll find out. The house is scheduled to close next Friday, it’s anybody’s guess whether that will happen or not…

We had two appraisals on The Probate House in the past two weeks, as expected. The buyer is getting an FHA loan and we’ve held the property for less than 90 days, so we expected the extra scrutiny. Especially given that we’re selling the property for more than double what we purchased it for.

Because we’ve severely underpriced the market on this house (we wanted a quick sale, as the property is about 30 minutes from where we live and we hate the drive each time we need to deal with the property), we were curious where the appraisals would come in. Would they be for a good bit more than the sale price? Or would the appraisers be reluctant to value the house much above the sale price, even if there were comps to support it.

Turns out we had one of each on the two appraisals…

The house is being sold for $144,900. The first appraisal came back at $165,000, which is probably pretty close to the market value (the comps I looked at indicated it was probably about $170-175K). The second appraisal came in at $145K!

So, clearly the first appraiser had no issue with valuing the property near the real market value, but the second appraiser was reluctant to go anything above the sale price. All that mattered to us was that the appraisals came in high enough to sell the property, but we know that the two very disparate appraisals are very confusing for the buyer, who doesn’t understand the games that appraisers are playing these days.

Luckily, he knows he’s getting a great deal, so we don’t expect the second appraisal to impact the sale, but it’s still frustrating that we had to spend time explaining to him all the wacky aspects of appraisals in this market…

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…

I mentioned on Friday that we had two agents who had potential buyers, and one of those agents came through with an offer on Saturday. In fact, it turns out that the agent wasn’t representing a buyer at all — he and his wife are the buyers. They have been looking for a home in the area for quite a while, and were shopping for themselves when looked out our house a couple times last week.

Also over the weekend, we received a verbal offer from an agent who took her buyers to the house Saturday afternoon. At about one o’clock Saturday, I received a call from the agent asking if the house was still available and if she could take her buyers through it; forty-five minutes later, we had the verbal offer.

We let the first buyers know about the verbal offer, and within a couple hours, they had submitted a full-price offer. While we considered waiting for the verbal offer to submit a formal offer, we decided to try moving forward with the first offer instead. There were a number of contingencies and stipulations that we weren’t completely comfortable with, so we countered with what we thought was a bit more reasonable, and by Sunday evening, we came to a formal agreement. We’ll keep the other offer as a backup in the case this one falls through.

The buyers have a long due diligence period (2 weeks) due to some personal scheduling issues they have, and the closing is five weeks out (also some personal scheduling issues). I much prefer giving our buyers short time periods for contingencies and the closing, but there were some extenuating circumstances in this case (and the overall offer was very decent), so we were willing to drag things out a bit.

I’ll have more to say late next week when we’re towards the end of the due diligence period…

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…

She called my wife and basically said, “I live in the area with my mom and have been driving past this house for 19 years. I really want it!” So, we scheduled a time to meet with her mom and her to show them the property. They spent about an hour looking around the property and said they would discuss it and call us the next day.

Sure enough, the next day we received a phone call from the woman. She mentioned that her mom wasn’t interested in buying the house but that she was going to do whatever it took to buy it herself. We told her that she would have to pre-approve with our mortgage broker before we signed a contract, and offered her a very good price, given that we wouldn’t even have to put it on the market if she were to buy it.

The next morning my wife gets a phone call from the woman. The woman tells my wife, “God came to me last night and informed me that I shouldn’t buy the house…it’s not the house for me.”

My wife didn’t have the heart to tell her that we had received the same information…however, in our case, the message came from our mortgage broker after he pulled her credit…

You get all kinds in this business…

I never did get around to posting the BEFORE pics (maybe before we sell it), but here are the final pictures of the house…

The house is deceptively big. Not shown in the pictures is two extra rooms that could be bedrooms or work areas, a storage room in the garage, an “office” in the garage, a mud-room, and another interior storage room. The house is about 2300 square feet, but because part of it was an addition that was laid out very poorly, it’s easy to miss a good part of the house if you’re not searching for it.

After all was said and done, we spent about $20K on rehab — we removed three dumpsters worth of trash, replaced a good bit of siding and trim, reglazed the windows, repaired the roof, replaced the gutters, removed a problematic tree and its root system, remediated all the interior mold and replaced the damaged drywall, treated for and repaired some termite damage to the framing, replaced most of the light fixtures, replaced a couple exterior doors, painted inside and out, and replaced the carpet. We still need to fix a couple minor electrical and HVAC issues, and the house will be ready to go.

Ultimately, this was more a remediation rehab than a structural or cosmetic rehab. In other words, we focused on fixing the mold issue and the root causes of the water penetrating the house; while we also did a bit of structural work (repaired some termite-damaged framing) and a good bit of cosmetic work, the remediation was our key concern and the most important piece of the renovation.

The house is going on the MLS today, and hopefully we’ll get some good feedback from potential buyers…