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.

This was a tremendously smooth deal and an easy closing, which was surprising given that the buyer used a lending program I’d never heard of before (NACA). As I mentioned in a previous post, NACA is for borrowers with less-than-stellar credit, and relatively low income. When I saw the closing docs today, I was even more amazed. NACA allows buyers to use seller paid costs to buy down the interest rate on the loan, providing low loan payments. In the case of our buyer today, her 30-year fixed interest rate was .125% (yes, an eighth of a point!).

The buyer ultimately got the house for about $92K (a $113K purchase price minus $21K in seller paid closing costs), but given that interest rate, with all taxes and insurance included, her monthly payment was under $500 per month! Unbelievable. Even more unbelievable, the total interest on the loan, over the entire 30 year term, is only about $2400. Compare that to a typical 5.5% interest rate 30-year fixed loan, where the buyer will end up paying as much in interest as the amount of the loan (so, a $100,000 loan will ultimately cost $200,000 to repay).

There are some restrictions though. For example, the buyer can never rent the house out as an investment, and she has to do some “community service” (I’m not sure exactly what qualifies) as part of the NACA process. According the closing attorney today, less than 1% of all NACA borrowers default on their loan, which means this program is doing a much better job of screening applicants (and helping them) than the rest of the lending industry.

Anyway, on with the analysis…

Timelines

This was a pretty typical project in terms of the timeline. It was a quick rehab that we dragged out a bit because we had other projects going on, and then we were able to put it under contract right around the 90 day mark. While it wasn’t an FHA buyer in this case, I’m always happy when we can get a house under contract by the three month mark, as that’s the minimum turnaround time for an FHA purchase.

Here are the key timeline milestones:

• Purchase Offer Date: 4/1/2009
• Purchase Closing Date: 4/20/2009
• Rehab Completion Date:6/4/2009
• Sale Listing Date: 6/5/2009
• Sale Contract Date: 7/16/2009
• Sale Closing Date: 8/17/2009

This closing was supposed to happen a week ago, so while we held the house for a total of 119 days, we probably could have shortened it to 112 days had we been more persistent.

Financials

We bought the property for $45,000. We sold the property for $113,500, but paid over $21,500 in closing costs to the buyer. It was a relatively small rehab for us (about $15K), and everything else about the project was pretty standard.

Here is the breakdown of financials for this project:

In terms of our profit, I’m very happy about making over $25,000 on this one. When we first purchased the property, I was pretty sure that we could hit our $20K profit target, but there were times during the project when I was concerned it might sit on the market for a while, or it might have difficulty in appraising for the sale price.

In terms of ROI, my total investment into this property was just under $14K; this puts my ROI at over 185%, and adjusted for the time we held the property, our annualized ROI is right about 570%. As usual, not bad on our ROI!

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: 19 Days
• Rehab Time: 44 Days
• Selling Days on Market: 41 Days
• Selling Close Time: 32 Days
• Total Hold Time (Close to Close): 119 Days
• Total Profit: $25,588.43
• Return on Investment (ROI): 185.24%
• Annualized ROI: 568.18%

Now, I wanted to give a general update on what’s going on with all our properties, and our search for more properties…

House #1: The Corn House

We were hoping to close on the lease purchase of this house at the end of this month, but given some recent events, I’m pretty sure that won’t be the case. First, the buyers were supposed to contact the lender at the beginning of the month to get their credit pulled and see if they were close to qualifying for the FHA loan they’d need to close on the house. They didn’t actually contact the lender until just the other day, so we don’t know if their credit has improved or not, and even if it has, there’s little chance we’ll be able to hit an end-of-month closing.

Additionally, the buyer’s rent check bounced this month. This is the first time this has happened, and while they were tremendously apologetic and immediately got a cashier’s check for the balance owed, it didn’t provide me any more confidence that they have their finances in order.

Tomorrow, we will speak with the lender about where their credit is, and we also have a meeting scheduled with the buyers to discuss next steps. Assuming they won’t be able to close on the house before the contract expires on 8/31, we need to figure out what we won’t to do with them. Our two most likely options are: we could cut them loose, and put the house back on the market; or we could extend their lease purchase for another several months. Considering we’re making great money off the lease purchase (both the rental income and the monthly option fee that we’ll keep if they can’t close), extending their contract probably isn’t a horrible financial decision.

That said, we still have $100K of our own cash tied up in this property, and with them bouncing their rent payment this month, I’m a little concerned about future payments. My wife and I need to sit down tonight and figure out our strategy before tomorrow’s meeting.

House #6: The Red Garage House

The Red Garage House is under contract again! We received two offers at the end of last week, and one seemed much more likely to result in a smooth closing than the other, so we pursued that one. The buyer immediately accepted our first counter-offer, and now has 7 days to complete their inspections and any other due diligence they want to do. We provided them a copy of the Inspection Report from the first set of buyers we had on this house, so they may not even choose to have another inspection on their own.

That said, it’s an FHA loan, so the lender will want to do an FHA inspection, and will also need to do at least one — and probably two — appraisals. I expect those to happen later this week, and assuming we don’t run into any appraisal issues, we’re scheduled to close on the sale of this property on September 7.

House #8: The 16-Bid House

It’s now been 24 weeks since we got this one under contract to buy, and we still don’t have a closing scheduled. At this point, I’m fairly certain they won’t get the title issues resolved anytime soon…while there is no possible title issue that should take this long to clear, my guess is that Fannie Mae (the seller) is just very backed up in resolving their title issues.

The contract expires for the 5th time at the end of the week, and assuming the seller doesn’t back out, we’ll just sign another extension. This time, I may ask for some of my earnest money back (we have $10,000 tie up in earnest money), though I don’t expect them to be reasonable about it. Between the listing agent and the seller, nobody’s been very reasonable in trying to help us with this deal.

Anyway, there’s nothing more to say here…it’s still just wait-and-see…

House #9: The Hat Trick House

After several delays due to RESPA regulations, we finally close on this house first thing Monday morning. It feels like forever since the last time we closed on the sale of a house, so I’m pretty happy about this one.

We moved all the furniture out the house on Friday, and we’re meeting the buyer and her agent over there right before the closing to do a final walk-through. The only issue that needs to be fixed is a roof problem that the inspector found a couple weeks ago; apparently the roofing company knocked out a piece of soffit at the top of the roof during the maintenance they performed, and just need to come out and reattach it. They’ve been putting off coming to fix it for two weeks, and with the walk-through scheduled for 9am, we’ve told them they better get it done very early so that the buyer doesn’t complain.

More on this after the closing…

House #11: The Sunglasses House

This one is almost finished. The oak hardwoods went in last week, and all that is left is the kitchen cabinets, a bathroom vanity, carpet, finish plumbing, and new garage doors. Hopefully all of that will get completed this week, and then it’s just the little stuff, like door knobs, switches and new outlets.

This project is going to end up going about 8 weeks (a week or two over schedule) and will end up costing about $65K. The results are fantastic.

I plan to do another video this week, so stay tuned…

House #12: The Mini House

We have buyers for The Mini House all lined up. After some back and forth with counter-offers, we finally came to agreement on terms and everyone is happy. Unfortunately, though, it’s an FHA purchase, and the buyer’s lender has informed us that they can’t even put the house under contract until after the 90 day seasoning period, which ends on September 26. That means we’d likely close mid-October at the earliest.

We’ve told the buyers that, as long as we don’t find another buyer who can close significantly sooner, we’ll hold the house for them. I figure that if we don’t find a buyer who isn’t subject to the FHA seasoning before mid-September, we’ll get the ball rolling with these buyers and have them start their due diligence. That way, by the time they sign the contract, we can be sure they they’ve completed their inspections and are ready to move forward as quickly as their lender can do it.

Making Offers

My wife and I spent about 8 hours today checking out properties, as we’re ready to purchase a few more. Unfortunately, we weren’t thrilled with the inventory that’s out there right now. We did find a couple houses that we plan to put offers in on tomorrow, and hopefully there will be some new listings in the coming weeks that are attractive investments.

That’s it for now…more tomorrow…

We fully expect this closing to go smoothly, so we have no concerns about the date slipping out a couple days; that said, we’re moving the furniture tomorrow, and can’t wait to officially have this house sold.

In other news, we believe that our counter-offer on The Mini House is about to get accepted. And we have two agents who are telling us that they are getting ready to submit offers on The Red Garage House sometime in the next 24 hours. At this point, I never believe we’re getting an offer until I see it on the fax machine, so I’m not getting my hopes up.

But, if we do get both these houses under contract this week, we’ll officially be out of houses to sell.

Anyway, a quick update on The Hat Trick House…

We are scheduled to close on Tuesday afternoon, and have already received the final HUD statement. Unbelievable considering we generally don’t see the HUD until an hour before closings these days.

Our profit on this one is likely be about $25K; I’ll post the final numbers and quick project recap after the closing next week…

This is especially good news considering the issues we’ve had the past few weeks with appraisals in this neighborhood. Here’s a quick recap…

The Red Garage House (which is in the same subdivision as this one) was listed at $109,900 and was under contract for $109,000. It received an appraisal of $94K, which forced us to drop that contract (we couldn’t make enough money at that price). While we knew that appraisal was low, we couldn’t be confident that we’d be able to get a much higher one should we put it under contract again, so we were somewhat stuck and had to lower the asking price.

If it goes through, the sale price of The Hat Trick House will be $113,500. We won’t net anywhere near that much, as we’re paying $21,000 in closing costs for the buyer (that’s the way the buyer’s loan program requires it to be done), but the sale price will still show up as $113,500 in the MLS. This means that we now have a very good comp for The Red Garage House, and it should be able to appraise high enough that we can raise the price again.

We are scheduled to close next Friday, and hopefully there won’t be any roadblocks between now and then…

House #1: The Corn House

We’ve collected four on-time rent checks, and according to the contract, we should be closing on the lease-option on this one at the end of next month. Unfortunately, based on the credit check that the mortgage broker ran last month, it’s unlikely the buyers will be in a position to qualify for a loan by the end of August.

We haven’t talked to them about it yet, but my guess is that they’ll want to extend the option, and given how much we’re making in rent and option fees on this property, we’ll be inclined to extend the contract for them. I expect we’ll probably extend the contract through the end of the year, and hopefully by then they’ll be in a position to get funding and purchase the house outright.

House #6: The Red Garage House

The Red Garage House is still on the market, and we’re actually hoping we don’t get an offer before the end of next week. The Hat Trick House is in the same neighborhood and is under contract, and we’re hopeful that once it sells, that will help us generate a higher appraisal for the ultimate buyer of The Red Garage House.

If you recall, the sale of this one fell through when it didn’t appraise for what we needed, so having The Hat Trick House sell will likely help us to avoid that problem the next time around.

House #8: The 16-Bid House

It’s now been 19 weeks since we got this one under contract to buy, and we still don’t have a closing scheduled. The title company has given up on trying to get two liens cleared from the title, and have passed the issue on to Fannie Mae, who is now working on getting the title cleared.

The extended contract expires again next week, and we’ll see what the title company has to say before we decide if we want to extend it again or whether we want to just give up on this deal. My project manager stopped by the house last week to check on it, and apparently some kids decided to throw a 4th of July party there (used fireworks on all the floors); there was some other new damage as well, but until we hear something from the title company, I’m not even going to bother spending time trying to run the new numbers on it.

House #9: The Hat Trick House

The Hat Trick House is still under contract, and we’ve already been through two inspections. On the first, the inspector from NACA (the lending program the buyer is using) did a full inspection and made a list of the issue that he and financing agency would be concerned about. There were about 6-8 little things that he noted, with only 2 issues required to be fixed in order to process the loan (inoperable garbage disposal and inoperable gas fireplace).

It turns out that neither of the two issues were really issues — the garbage disposal did work (he just noted it incorrectly) and the gas supply for the fireplace was just turned off at the meter. So when he came out for the re-inspection of those issues today, it only took about 5 minutes and everything was signed off.

The next (and hopefully final) hurdle with this loan is the appraisal. As I mentioned previously, the offer was significantly higher than the asking price (based on the way the loan is funded), so it must appraise for a good bit more than we had expected. It turns out that NACA has their owner appraisers, and that they will fund up to 110% of the appraised value of the property. So, we only need to the appraisal to come back at 10% below the offer price, which is good. And the fact that they are using in-house appraisers is also good.

I’m still concerned about whether this property will appraise high enough or not, but everyone is so motivated to make this deal go through (especially the buyer), I have a feeling we’ll figure something out regardless of where the appraisal comes in.

House #11: The Sunglasses House

If you’ve been following the progress we’ve been making on this one (rehab video #1 and rehab video #2), you know that we were planning to complete the exterior landscaping and the interior painting this week. Well, we finished the landscaping, but instead of painting the interior this week, we switched things up and had the tilers come in to tile the fireplace and the shower instead. We also had our pest control company come in and do termite and rodent treatments.

Next week, the privacy fence goes up, the gutters go up, and the interior will be painted. After that, it’s down to reinstalling the HVAC systems, installing cabinets, fixtures, flooring and the finishing details.

My brother and his fiancee will be purchasing this house, and the last big renovation decision they need to make is whether to put a window in the downstairs “bedroom,” thereby officially making it a bedroom (county code requires an egress window or door to the exterior for the room to be considered a bedroom).

House #12: The Mini House

This property has garnered a lot of interest over the 3 days since it was listed. We’ve already had two showings and we have another three scheduled for this weekend. In fact, the first person who looked at the property has been back again, and supposedly she is planning to view it again this weekend with her family.

The only problem we face is that all the potential buyers we’ve spoken with would be getting FHA loans, and with the FHA 90-Day Rule, we wouldn’t be able to to sell to any of them until at least the end of September. Of course, FHA can take 45-60 days to process anyway, so even if we received an offer this weekend that we wanted to accept, the time frames aren’t that unrealistic.

That’s the scoop for this week…have a great weekend!

The offer is actually quite interesting…

The buyer is using a special loan program call NACA, which is a non-profit agency that counsels and assists buyers with poor credit to help them purchase homes with terms that are realistic for their situation. I don’t know much about the program, but the way the contract we received was structured, the buyer is offering much higher than list price and is asking for us to pay tremendous amount towards closing costs, much of this money going towards their buying down the rate of their loan (to make the payment affordable).

In real numbers, the house is listed at $99,900. The purchase offer is for $113,500, with seller paid closing costs of $21,565. This essentially makes their offer equivalent to $91,935.

Based on all our numbers, this is actually a reasonable offer, and will net us our desired profit on this property, so we’ve accepted the offer.

The big catch is that the house needs to appraise for the purchase price ($113,500), which is no easy feat in this market, especially considering that The Red Garage House down the street had two appraisals come back over $110K, but one appraisal come back at $94K. On the bright side, the loan is being made through Bank of America, and they will be providing the buyer a list of appraisers that can be used, and the buyer can choose his own appraiser.

We’ve asked them to provide us the list, and hopefully we’ll find someone we’ve worked with in the past.

Assuming the appraisal comes back above the purchase price, I’m hopeful this will be an easy deal. Apparently, it’s difficult to qualify for the NACA program — the buyer’s agent said she has been successful getting her buyers qualified less than 25% of the time — but buyers who do get qualified generally don’t have a tough time closing the deal, with closings potentially happening within two weeks of the contract being signed.

We’ve given the buyer until next Friday (July 24) to complete all contingencies (inspections, appraisal, financing, etc). If we get through the appraisal and due diligence period, we’re scheduled to close on August 7.

We dropped the list price on The Hat Trick House from $109,900 to $99,900. We knew going in that it was unlikely we’d get any offers at the $109,900 price, but given that The Red Garage House down the street got a near-full-price offer for $109,000, we decided something in that range was a good place to start.

But, now that it’s been almost three months since we bought the house — allowing us to sell to FHA buyers — we’re ready to get this one sold. Even at the new price, if we get a reasonable offer, we’ll make a good profit on this one, so I’m not concerned about the price drop. But, I had gotten accustomed to quick sales at near full-price, so in that regard, I’m a bit bummed.

We didn’t get too much traffic this weekend, but with the 4th of July holiday, that was to be expected. Plus, because we were out of town for the weekend, the houses were locked up and alarmed; the agents that did bring buyers by had to disable the alarm system, turn on the lights, and open the blinds themselves, all of which takes away from the first impression of the house. So, I’m not expecting any offers from the lookers this weekend.

I’m curious to see if we get more traffic this week, or if summertime is slowing things down. Since we aren’t actively marketing any other properties, I’m really not sure if there are a lot of buyers out there right now or not…

House #1: The Corn House

Nothing new with this house…just looking forward to collecting our third (on-time) rent check…

House #6: The Red Garage House

I’m so angry that it’s difficult for me to write this without screaming at my monitor. It’s now been over 6 weeks that the buyer’s loan has been in underwriting!

But, that’s not what I’m angry about…

We completed the second appraisal last week, and it came back above the purchase price, so we were confident that we had cleared that hurdle. In fact, the head of underwriting told us that once the appraisal was approved, we should get a clear to close on the sale. Today, at about 6pm, we received a call from the loan processor, who had just spoken to the underwriter…

Apparently, the appraiser that the mortgage broker used for the second appraisal wasn’t approved by the lender, and therefore the appraisal isn’t acceptable! Yup, that’s right…we wasted 2 weeks and $400 on an appraisal that we can’t use. And had it been done properly, we’d be scheduling the closing right now.

I haven’t yet gotten a hold of the broker, but when I do, I’m going to spend a long time chewing him out. Hopefully we’ll be able to get another appraisal done next week, and still get this thing closed. Okay, I need to stop writing about this, as I’m just getting more and more angry…

House #8: The 16-Bid House

It’s now been nearly 15 weeks since we got this one under contract to buy, and we still don’t have a closing scheduled. The title company has given up on trying to get two liens cleared from the title, and have passed the issue on to Fannie Mae, who is now working on getting the title cleared.

We got very frustrated with this one earlier in the week, as the listing agent and the title attorney were ignoring our calls. So, we started calling their bosses (including the head of a relatively big brokerage around here), and started making waves. We likely pissed off some people we probably shouldn’t have pissed off, but I don’t really care. There’s just no excuse for ignoring a customer, even when it comes to high-demand products like bank-owned foreclosures.

Ultimately, we extended the contract again, this time through July 27. I have a feeling the listing agent and the title company would prefer if we just asked for our deposit back and walked away, but I’m not giving them the satisfaction. They need to put up with me until they get this deal done or until they cut me loose.

House #9: The Hat Trick House

This one has been on the market for a couple weeks now, and while we’re getting some traffic, we haven’t yet gotten any offers. It’s listed a little bit high, and I’d like to drop the price, but I’m waiting until we get some closure with The Red Garage House (which is in the same neighborhood) before dropping the price.

If we can get The Red Garage House closed with our buyer, we’ll immediately drop the price on this one to try to get a quick sale, but until we have some closure on the other one, I’m holding off.

House #10: The Deja Duplex

This one is sold…

House #11: The Sunglasses House

We closed on this one earlier in the week, and renovation is underway. Thursday was spent doing mold remediation, including a bunch of demo of drywall and other moldy surfaces. On Friday, we had the HVAC ducts cleaned to remove any residual mold, had some structural work done on the front and back decks, and started demo on the interior.

I’ll have some pictures next week, but suffice it to say, the house looks a lot different (and a lot better!) than it did just 2 days ago.

House #12: The Mini House

As I mentioned last night, we’re completing a survey of The Mini House to determine if it is actually in a flood plain or not. I’ll have more to say next week, but according to the surveyor, it looks like part of the property will definitely be in a flood zone, but the actual living space may not be. This would still require us to get flood insurance, but the cost should be dramatically less than if the entire property were in a flood plain.

I’ll know more over the weekend, and will write more next week…

That’s the scoop for this week…have a great weekend!