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 an update on where things stand with each of the houses:

House #1: The Corn House

Nothing much new here. We received our first rent check from The Corn House tenants — on time! This marks the first rent check we’ve ever received. While the house is currently under lease-purchase terms, I guess we can now consider ourselves landlords, huh?

House #5: The DIY House

This one is officially SOLD!

House #6: The Red Garage House

Surprisingly, this one appraised for over full purchase price! Of all the houses we’ve remodeled and sold, this is the the least expensive in terms of sale price, and also the one that I thought had the most chance of appraising too low. This is mostly due to the fact that there are a lot of foreclosures in the neighborhood and very few retail sales. But, the appraisal came back just fine.

In fact, the lender has decided not to do a second appraisal, which is interesting, as it should be required by FHA. Because we’re selling the house for more than twice what we purchased it for, the lender is required to do extra due diligence in ensuring the value of the property; normally that’s done with a second appraisal, but obviously the lender has latitude with exactly how they deal with this issue, and this lender has decided against the second appraisal.

This is good for us, if only because it means we can get to closing well before the previously planned May 31 date. Hopefully (and very possibly) next week…

House #7: The Roach Duplex

We are scheduled to close on the sale of this one tomorrow. The contract just got signed last Friday, so the title company is working feverishly to get all the details in order for a quick closing.

I’ll have more to say about this one after the closing this week…

House #8: The 16-Bid House

It’s now been over 9 weeks since we got this one under contract, and we still don’t have a closing scheduled. Supposedly, the title is now clean, but the title company hasn’t yet scheduled the closing.

We just signed an extension through May 22, so hopefully we’ll close before then and not have to do another extension.

House #9: The Hat Trick House

We’ve been dragging our feet on finishing this one, as we still have over two months before we can sell to an FHA buyer. Today we have the countertops being refinished, tomorrow we’ll install the last of the trim/baseboard around the new vinyl floors, Thursday we do a final cleaning, and then Friday we move the staging furniture in.

We still haven’t decided if we’ll put this on the market this weekend, or hold off another week or two. It would be bad to have to tell an interested FHA buyer that he has to wait 9 more weeks to buy the house, but there’s always a chance we’ll find a non-FHA buyer who’s interested, so that’s a good reason to get it on the market as quickly as possible.

Ultimately, this is my wife’s decision, so we’ll see what she thinks is the right thing to do…

This entire project has been insightful, fun, and rewarding — both financially and just from the perspective of renovating a relatively big house. This is the first major rehab we’ve done without a General Contractor, and we’ve quickly realized that managing the projects ourselves not only allows us to get things done cheaper and more quickly, but the added level of control is a great feeling.

At times, we had six or seven different contractors working along-side one-another, which provided some challenges (for both them and us); ultimately, it allowed me to create some scheduling processes and spreadsheets, which will make contractor scheduling much easier in the future.

Here is the run-down of the project results, with the final set of statistics at the bottom…

Timelines

The total holding time on this house was only 86 days! I’m always surprised when a project takes less than 90 days from purchase closing to sales closing, especially considering most of our buyers are FHA, and the rules that go along with FHA waiting periods. But, we got lucky that we found a non-FHA buyer within two weeks of listing, and other than some stress waiting for the appraisal to come back, the closing process went extremely smoothly.

In fact, from a schedule perspective, this project was about as textbook as I can imagine.

Here are the key timeline milestones:

• Purchase Offer Date: 12/7/2008
• Purchase Closing Date: 1/28/2009
• Rehab Completion Date: 3/13/2009
• Sale Listing Date: 3/13/2009
• Sale Contract Date: 3/26/2009
• Sale Closing Date: 4/24/2009

I think we can honestly say that we took many lessons from previous rehabs and applied them here, and everything came together very nicely with a 7 week rehab, a 2 week listing, and then 4 weeks to close…

Financials

We were able to sell this property for $127,500, just $7,000 less than asking, and about $7,000 more than I had forecast in my original analysis. Our total profit after all fees, commissions, rehab costs and other expenses was just under $30,000, also a good bit over my original forecast.

We had originally planned on spending about $40K on the rehab, but had the goal of trying to bring that down to $35K. In the end, our final rehab costs were just a few dollars less than $36K — not bad given our original estimate. The buyer decided not to have an inspection, so there were no requests for repairs or concessions after the contract was submitted, which likely saved us a few dollars these past couple weeks.

Here is the breakdown of financials for this project:

While these numbers don’t reflect the final holding costs — the final utility bills and insurance refunds have not been received — the final results should be within about $200 one way or the other.

In terms of ROI, my total investment into this property (Purchase Costs, Rehab Costs, Holding Costs) was $25,950.35; this puts my ROI at over 110%, and adjusted for the time this project took, my annualized ROI is over 480%.

This makes four sales in a row (all four that we’ve done) where are total profit was over $20,000 and our annualized ROI was over 300%. I’m very happy with our financial results so far.

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: 52 Days
• Rehab Time: 43 Days
• Selling Days on Market: 13 Days
• Selling Close Time: 29 Days
• Total Hold Time (Close to Close): 86 Days
• Total Profit: $29,551.71
• Return on Investment (ROI): 113.88%
• Annualized ROI: 483.32%

For the most part, we’re out of houses to work on. Most of them are under contract waiting to sell or under contract waiting to be bought, and other than looking for more houses, doing some book-keeping, paying some bills (and taxes!), and working with buyers and sellers, there isn’t any rehab work to be done. That said, next week we should be back to work with plenty to do, so I’m just enjoying the down-time while I can.

With nothing terribly exciting to report, here’s my end-of-the-week wrap-up…

House #1: The Corn House

Our Lease Purchase tenants have been great so far. No issues, good feedback, and they’re apparently still very excited to buy the house.

On the down side, they asked us the other day if they could have a dog while they leased our place. My wife and I discussed it at length, and while we’d love to let them, and while we’re confident they’ll eventually purchase the house, we decided that it just wasn’t prudent for us to allow an unknown dog to live in that house. First, there are new hardwoods in the living room and dining room. Second, without a fence in the back yard, there is additional potential liability.

We hated to have to do it, but we let them know that we just couldn’t allow it. In the future, we’ll make a point of having this discussion before tenants move into our properties, just to avoid having to “be the bad-guy” by saying no later on.

House #3: The Second Chance House

This one is finally SOLD!

Though the buyers did call us today and ask if we would come over at some point and fix a couple very minor issues. While normally I would have had a very big problem with doing this, these buyers provided us a nice payday, and have been very accommodating to us in getting this house closed quickly; so, I agreed to stop by and fix the minor annoyances (specifically, removing a cable TV line that is attached to the side of the house and readjusting a shower door this is misaligned).

Hopefully, there won’t be any ongoing requests…but I’ll cross that bridge when I come to it…

House #5: The DIY House

We’re pretty much set for closing on this one. We found out that the appraisal came back at $128K, just $500 above the purchase price; it appears that the appraiser really did go out of his way to help us (and the buyer) out on this one.

The only remaining issue that needs to be addressed is that the VA inspector is requiring us to put a railing on the stairs leading to the basement and a splash-block beneath the gutter spout in the back yard. We’ll take care of that first thing next week, have the inspector verify, and then hopefully close on this sale late next week.

House #6: The Red Garage House

As mentioned yesterday, we received an offer on this one, and now have a binding contract. I’m still very curious how the FHA regulations will play out on this one…

First, I was under the impression that FHA wouldn’t fund the purchase until 90 days after my deed was recorded (which just happened this week); but the buyer’s lender says he only cares that it’s 90 days past the purchase date (which would be May 14).

Second, I’m still under the impression that FHA will refuse to start underwriting unless the purchase contract is actually signed after 90 days; so, from FHA’s perspective, the contract we currently have is probably not good enough to start loan underwriting. But again, we’ll let the lender sort this out. If he comes back and says we need a new contract, we’ll worry about it then. As long as the buyer acts in good faith, I don’t mind jumping through some hoops to make this one work.

House #7: The Roach Duplex

As mentioned the other day, the second contract on this house fell through.

Earlier in the week, we received a third offer — verbally — for a good bit less than the asking price. We rejected it flat-out, and the next day we received another verbal offer from the same guy for a few thousand dollars more. We also rejected that one, but countered with our minimum acceptable price. He’s taking that back to his partners, and if he decided to accept it, great. If not, that’s fine as well.

We also received a phone call last night from a woman who was supposedly planning to fax an offer over to us, but we never received it. It’s amazing how flaky buyers are…these days (after maybe a dozen promises of offers on various houses), I don’t even start to think about an offer until we have it in writing, signed by the buyer.

House #8: The 16-Bid House

We still don’t have a closing date for the purchase of this one, but the pre-closer assures us that they now have clean title and that we should close “by the end of the month.” It’s been nearly 7 weeks since the bank accepted our offer, so I’m ready to close and get moving on this one…as are my contractors.

House #9: The Hat Trick House

We close on the purchase of this one early next week (Monday), and don’t expect this to be a tough rehab. In fact, this house is pretty much identical to The 16-Bid House, and they’re both pretty much identical to The Red Garage House, so our contractors already know what to expect and will be able to cruise through both of these projects in just a few weeks.

The big question is whether or not we should be rushing through these projects, just to have the houses sit for a couple months waiting for the FHA clock to run down. Hopefully we’ll be able to find a local bank that can provide alternative loans to first-time buyers will similar terms to FHA, but without the 90-day seasoning period. This would allow us to sell these properties quickly, without all the FHA hassles.

I found out last Wednesday that the appraisal was going straight from the appraiser to the underwriter, and was completely bypassing the mortgage broker. Apparently, this is common for VA loans, and the broker doesn’t get the appraisal report under a couple days after it’s gone through underwriting. Well, after almost a week of waiting and wondering, we finally got news from the other agent that the house appraised for at least the selling price. We still don’t know exactly how much it appraised for, but I really don’t care.

This is great news, and means that there aren’t any additional major obstacles (that I know of) standing between today and our closing date. Assuming things go as planned, we should close on the sale of The DIY House some time next week!

Two sales in one month would be wonderful, especially after receiving my tax bill today…let’s just say that pretty much all the profit from one of these houses is going straight to Uncle Sam tomorrow…

House #1: The Corn House

The Lease Purchase tenants at The Corn House moved in last week, and sent us a very nice email just the other day. They wanted to tell us how nice the house way, and how excited they were to be living there; they finished with, “We can’t wait until the house is ours!”

Not only did this make me feel good, but the fact that they’ve been in there for over a week without any issues is a good indication that my contractors did a good job on that house. There were many things that were never used before (brand new shower, new faucets, new toilets, new decks, etc), and I expected for the tenants to find at least one minor issue (and I told them to let me know if they do find anything, so I can fix it). Perhaps they’re just not telling us about it, but according to their email, everything is working fine.

We’re planning to check their progress on improving their credit in a few weeks (they’ve been using the credit repair company for two months now), and hopefully the news will be good.

The best news is that their first rent check cleared…

House #3: The Second Chance House

We’re hoping to close on the sale of The Second Chance House on Monday. So far, everything is going smoothly, and unless something crazy happens in the next couple days (it’s happened before), I think we may actually get to closing without any major issues.

More on this next week…

House #5: The DIY House

We still haven’t gotten any information on the appraisal for The DIY House. Apparently, with VA loans, the appraiser completely bypasses the mortgage broker and sends his report directly to the underwriter. This happened two days ago, and we’re hoping the broker gets the appraisal information in the next day or two, so we know if this closing is going to happen.

Other than the appraisal (which really shouldn’t have been an issue), I see no major obstacles to this one closing in the next week or two…

House #6: The Red Garage House

The Red Garage House is the current MAJOR FRUSTRATION for us right now. We finally got pictures on the MLS earlier this week, and within a couple days started getting calls. The very first buyer who walked through the house loved it, and wanted to put in an offer!

That’s the good news.

The bad news is that the buyer wants to use FHA financing, and we’re still subject to the FHA 90-Day Rule for this property (we purchased it on February 12). That would normally mean we should be able to close around May 14 (91 days after purchase).

The really bad news is that the clock starts ticking on the 90 days not when we purchased the house, but when the deed was recorded (as I mentioned in yesterday’s post). Unfortunately, the title company that closed this deal screwed up the deed recording, and IT STILL HASN’T BEEN RECORDED. Yup, that means the 90 days hasn’t yet started ticking, and there’s no way to close this deal with an FHA buyer before July, at the earliest.

Which means the buyer who really wants to put in an offer is out-of-luck as well…

House #7: The Roach Duplex

This one is under contract, and the buyer has until next Friday at midnight to perform his due diligence. We won’t know anything more until then — unless he backs out of the deal earlier…

House #8: The 16-Bid House

First, here are some BEFORE pictures of The 16-Bid House…

We still haven’t closed on this house. The title company is now telling us that they think they should have clear title in the next week or two, and are confident that we’ll close before the end of the month.

This one is really frustrating, because we have little else to do these days, and our contractors are all on-hold waiting for this property to close. Hopefully they won’t find any other long-term jobs in the meantime.

House #9: The Hat Trick House

First, here are some BEFORE pictures of The Hat Trick House…

This one is scheduled to close on April 20, which means it will likely close before The 16-Bid House, despite us getting it under contract a month later. Hopefully they’re planning to use a better title attorney.

So there you have it — we have 7 houses that we’re “working on” and we essentially have nothing to do. We’re putting together Scope of Work and Materials List documents for The 16-Bid House and The Hat Trick House, but those are pretty much exactly the same as The Red Garage House, so the work is essentially done.

We’re also looking for more houses to buy, and currently have three offers pending, of which we hope to get one accepted.

The buyers are getting a VA loan, and the appraiser came out today. I met him at the house, and was hoping to walk away confident that the appraisal would come back well above where we needed it to be; to be honest, of all the houses we have done, this was to be — what I thought — was the easiest appraisal. The house is selling for $127,500, and I imagined the market value would be somewhere in the low- to mid-$140K’s.

Anyway, I met the appraiser at the house, and the first thing I said (with a smile) was, “So, we’re not going to have any issue hitting our number on this one, are we?” He just gave a little laugh that sounded to me as if he was saying, “Yeah, right. Good luck, buddy.”

After talking a bit more, I think he explained that he couldn’t use repairs/renovations in the house to impact the appraised value, which didn’t make any sense to me; generally, things like new cabinets, all new flooring, lighting, paint, etc, should increase the appraised value relative to the comps, at least according to previous appraisers I’ve worked with. Part of the issue I had was that the appraiser had had mouth cancer, and had part of his tongue and jaw removed. It was very difficult to understand what he was saying (at least at first), and I felt bad asking him to repeat things multiple times. So, I didn’t really get the details behind not using the renovations as part of the comp analysis. I’m not sure if I misunderstood, or whether that was something specific to do with the VA appraisal process or even something specific to how he did comps.

He then went on to tell me that he could only find two comps in the subdivision, and that he’d have to use foreclosures to make up the rest of the comps! And again, he alluded to the fact that I should be doing the very minimum in repairs, as they didn’t really help my appraisal. Ugh.

Anyway, he took measurements, strolled around the house taking a few notes, and then wrapped up. Didn’t take pictures, didn’t ask many questions, and didn’t spend very long at the house at all. He did spend long enough to tell me how screwed up the VA, HUD, and FHA rules were, and to reiterate that I needed to start doing much more minor rehabs if I wanted to hit my appraisal numbers.

When he left, I again asked if he thought we could make our number, and he again laughed under his breath. He said he’d be done with the appraisal tomorrow, and would call us “if there were any problems.” When I got home, I took a look on the MLS, and it’s true that there aren’t many comps in the past 12 months. If we could go back 14 months, there are a couple newer and bigger houses that sold for much more than ours, but I’m guessing he won’t go back that far, nor will he use these other houses as comps.

While I agree that there aren’t many comps for this house, it still surprises me that we may not hit our number, just given the 1-2 year sales and the condition of the house.

I’m curious if there’s any recourse to a low appraisal…can I ask for a do-over? Can I request another appraiser? Or am I stuck with this appraisal with this lender, and that’s all there is to it?

House #1: The Corn House

As mentioned previously, The Corn House is under a Lease Purchase contract for the next 5 months, and hopefully we’ll be able to sell it by August. We met with the buyers a few hours ago to collect the security deposit ($1500) and their first month’s rent ($1000), so at this point we’ve locked in at least $3000 on the property. Additionally, the “buyers” will be paying $1500 per month through August, with $500 applied towards their down-payment and closing escrow and $1000 coming directly to us as rent.

I’m curious as to how this will play out; the “buyers” seem like a great family, and I know they really want to be able to buy the house; hopefully they can get their credit in order in the next couple months, and everyone will be happy come August…

House #3: The Second Chance House

Tonight is the expiration of due diligence on The Second Chance House, which means that if the buyers back out of this deal after today, we at very least get to keep the $1000 deposit. (Wow, I must really be starting to become cynical when I’m expecting buyers to back out and just get their earnest money!)

The buyers have asked for about $2000 in additional closing items (a property survey and a few repairs), which given their request for very little in seller-paid closing costs is completely reasonable. I generally expect to pay $4000 in closing costs for the buyer, and they only asked for $2000; so the $2000 in “extras” really isn’t that big of a deal.

Anyway, I’m ready for this property to close. With the long rehab that ended over the holidays and the first offer that fell through, our hold time on this property is nearly 7 months, and I hate holding properties that long. While I love this house, it’s time for it to get a new owner…

House #5: The DIY House

I’m still amazed that we got the buyer to sign the contract on this one!

Not only that, but she drove an hour in the rain this morning to deliver the earnest month check to the broker, and she is telling everyone that she wants to close as quickly as possible. Her lender says there’s a new VA loan process that allows buyers to get loan approval within 10 days; I don’t know if it will happen or not, but it’s possible we could close on this one in less than two weeks.

While I’m always happy to sell a house, I’m going to miss this one. It’s my favorite rehab so far (I’d live there in a heartbeat), and we are constantly getting phone calls asking about it. It doesn’t surprise me that our total hold time will likely be well under three months; my question now is whether we let it go for too little?!?

House #6: The Red Garage House

The Red Garage House is about ready to be put on the market. We had our cleaning woman come in today for the final clean, and we finished up a bunch of the final rehab items (paint touch-up, smoke detectors, shelving, etc).

We’ve decided not to stage the property right away, for two reasons:

1. We don’t have any extra furniture to use right now. With furniture at The Second Chance House and The DIY House not ready to be moved, we’re out of staging furniture. And we don’t want to buy new stuff, as both those other sets of furniture should become available in a few weeks;
2. This house will likely sell to an FHA buyer, meaning they’ll have to wait until 90 days after we purchased it to close — which is May 14. Given that, we’re in no hurry to get it under contract, so there’s no hurry to get it fully staged.

We’ll likely finish it up and list it this weekend at a little bit higher price than we had planned, since we have a couple extra weeks before we really plan to sell it. If we get an offer at the higher price, great; if not, we’ll drop the price in a week or two as we approach the 90-day mark.

House #7: The Roach Duplex

No update on The Roach Duplex. We’re still getting a few calls per week, but no serious offers. I’m in no hurry to sell this (I’ll keep it for the next 5 years, if necessary), and unless my wife tells me about the phone calls, I generally forget we even own it.

House #8: The 16-Bid House

We were supposed to close on this one today, but the closing attorneys still haven’t come back with clear title. I have no idea when it will happen, but hopefully sometime next week.

Now that The Corn House, The Second Chance House, and The DIY House are under contract, and now that The Red Garage House is practically on the market, we’re out of houses to work on!

I guess it’s time to start buying again…

It’s a very decent offer — about 95% of asking price, with us providing 3% in seller-paid closing costs and some of the staging furniture thrown in. The best part is that there is no due diligence period, so we don’t have to worry about her getting cold feet again, or coming back to ask for more concessions. At this point, if she decides to back out for any reason, we can keep her earnest money deposit. And because she chose not to use our lender, we insisted that her deposit was 1.5% of the purchase price (nearly $2000). Hopefully, that’s enough incentive to get her to see this through to closing.

All-in-all, she’s getting a great house at a fantastic price (about 10-15% below market from our analysis), so I don’t expect her to have any regrets once she moves in. Closing is scheduled for late-April, and if her lender can push through the VA loan faster than that, I’ll push for an even earlier closing.

House #3 Update:

In other good news, we got a call today from the previous Second Chance House buyers — the ones who lied to us about their credit and ultimately terminated their contract. They called my wife today to tell her that they finally were cleared for their loan, could close in three days, and wanted to know if the house was still available!

After having them send us an obnoxious email last week telling us that they wouldn’t put up any additional earnest money because “the house will still be on the market whenever we’re ready to close,” my wife took great satisfaction in letting them know that the house was already under contract again, for full price.

Almost makes me want to believe in karma…

Personally, I think the issue boils down to the fact that the buyer is getting cold feet. We’ve made what we believe are some very large concessions, and have even spoken with the buyer directly to alleviate some of her concerns, but she keeps finding reasons to put off signing the final contract.

We feel we’ve made the best effort we can to help her overcome her concerns, but if the buyer is going to flake on us, we’d rather know now (and not even sign a contract) than to find out several weeks after the contract is signed…

So, today we submitted our final counter-offer, which essentially meets all of the buyers requests plus a couple of our own, and she has until 5pm on Thursday to sign it — or not. I’m fairly certain this deal isn’t going to happen, but we’ll know for sure on Thursday.

We’ve gotten a lot of interest in this property over the past week and a half, so I’m not really concerned about being able to sell it…it’s just a matter of finding the right buyer…